Mike Stone
Tell about your background, schools attended, family, etc.
I am the president & chief operating officer of RLI. I earned a B.A. from Bellarmine College in Louisville, Ky., and a J.D., magna cum laude, from the University of Louisville. I joined RLI in 1996 as vice president, claims and was named senior VP, claim in 1998. Later that year, named executive vice president, overseeing underwriting, claim, and branch operations. I took my current position in 1999.
I have three children: Todd, 34, who lives in New York, Dean, 32, who lives in Atlanta and Eric, 20, who is attending the University of Maryland. My wife Elizabeth has two children: Cameron, 9, and Colby, 8, who are both attending Peoria Academy.
You began your career with RLI in 1996 and have progressed to your current position as president and COO. Tell us about your responsibilities today.
I have the overall responsibility for all operations of RLI Corp.’s Insurance Subsidiaries: RLI Insurance Co., RLI Indemnity and Mt. Hawley Insurance Company, which includes the insurance operation, i.e. home office underwriting, product underwriting and production, claims and reinsurance.
Where is RLI in the current insurance marketplace?
RLI consistently earns underwriting profit, outperforming the industry by an average of 14.3 points over the last 10 years. The company is rated “A+ Superior” by A.M. Best, the nation’s top insurance rating agency. This distinction is held by fewer than 10 percent of all U.S. property and casualty companies. RLI operates in “niche” areas in which other companies are unable or unwilling to participate. We have a pristine balance sheet and are very disciplined, yet agile and innovative enough to respond to opportunities quickly if we see an idea that fits our appetite and business model. Conversely, if a new program is unsuccessful, we will discontinue it after a reasonable trial period. We succeed in these areas because talent is our primary value, i.e., we manage a portfolio of insurance products and only hire the top industry people to manage our products.
Competitors vary by product, whether it’s property, casualty or surety. Since we write business for profit instead of for market share, we may not even be seeking the same goals as our competitors. Our outstanding financial performance in recent years indicates that we’re doing a great job of accomplishing our mission:
• To provide our customers with outstanding service through innovative risk management products and solutions
• To dedicate our attention to carefully chosen niche markets
• To attract outstanding talent and continuously develop our expertise
• To constantly re-evaluate, enhance and reinvigorate our business model to create new products, services and delivery systems
• To create long-term shareholder value by pursuing profitable growth, underwriting for profit, and earning returns that significantly exceed our cost of capital
Tell how RLI has changed its focus through the years.
RLI began as a corporation in 1965, exclusively providing insurance for contact lenses. When disposable lenses became prevalent, the product line was discontinued. We continued to serve the ophthalmic industry and the original product has morphed into a 42 percent ownership at Maui Jim, another Peoria-based company employing almost 500 people. RLI has expanded into property, casualty and surety coverage, written through 28 underwriting offices around the country. Last year we wrote $756 million in premiums. Our insurance ranges from highly automated, self-underwriting products to highly complex, individually underwritten coverages. Our customers are businesses and individuals throughout the United States.
What is unique about RLI company culture?
RLI emphasizes underwriting expertise. Our managing underwriters are among the most experienced in the industry, with extensive experience and technical expertise in their particular product. They are rewarded for profitability, not market share, and there is no cap on their underwriting bonus potential. All RLI employees are highly educated and motivated. New hires must have achieved a 3.0/4.0 grade point average in their most recent course of schooling. Employees are owners of the company, sharing in the company’s success through Peoria’s first ESOP program. They have an added incentive to eliminate wasteful practices and keep a sharp eye on the bottom line.
RLI’s niche is providing creative solutions to complex problems. What are some of the more unique requests for insurance coverage the company has received?
We provided property coverage for the World Trade Center (although that coverage ceased a good year before the WTC was destroyed), policies for one of the largest U.S. freight haulers, Hawaii homeowners, many of the Florida service stations you saw being pounded by hurricanes the last few years and bonds for oil platforms in the Gulf of Mexico.
RLI’s home office is in Peoria, with several other locations around the country—how does RLI maintain a community presence in those areas?
While we have fewer than 75 people in any one office, other than Peoria, we encourage community involvement, as well as education in leadership skills and insurance business.
How does RLI manage its exposure to catastrophic events, such as floods, hurricanes, earthquakes, fires, etc.?
We have a catastrophe management team including underwriters, actuarial and reinsurance experts. They monitor our aggregate of exposure for various events like earthquakes.
Computerized forecast models play an important role in RLI’s catastrophe underwriting process. They give us a fairly precise method of tracking our accumulation of business in catastropheprone areas. We monitor the aggregate policy limits in force by catastrophe zone.
Of course, after a catastrophic event, our reinsurers may be weakened, so we watch our reinsurance situation very closely, making sure those participating with us will be able to pay their bill when the time comes. If we have to realign our reinsurance support, we’ll do it.
What future changes/plans do you foresee for RLI?
RLI plans to continue growing the company and serving our customers. We are in business to make risks acceptable and pay claims so that individuals and businesses can pursue their goals without fear of financial ruin. We also pledge to make RLI a prudent and reliable investment for our shareholders. Our business model has been quite successful. Combining it with guidance from our core values, we will seek new business opportunities, evaluate acquisitions and recruit outstanding talent to take us to the next levels. We will stretch, but not overreach, play to our strengths and live up to our theme line, “Fundamentally Innovative.”
As COO of an insurance company, what do you advise other companies to keep in mind when planning for the protection of their people, buildings and intellectual property?
Buy insurance—and be smart about it. Get expertise in loss control, analyze your risks and hedge them via loss control techniques and insurance policies, preferably from a trusted insurer with documented financial strength like RLI.
What’s the best career advice you’ve ever received?
My dad encouraged all nine of his children to get an education then get a job. He told us if you work hard, learn your trade and stay out of trouble, good things will happen. I would amplify that to say you need to thoroughly develop a technical skill like insurance, underwriting or claim, and then you are positioned to stay in a technical career or branch out into management.
What are some common misconceptions of the community regarding RLI as a company or about the insurance field in general?
About the insurance field in general, one popular misconception is that insurance companies try to avoid paying claims. The $30 billion in claims paid for the World Trade Center tragedy, as well as the billions more paid over the last two hurricane seasons, belie that misconception entirely.
The fact is that insurance is the most regulated business in the United States. State insurance commissioners and other regulatory bodies will investigate, pursue and prosecute any company that goes out of bounds. RLI can relate many gratifying stories from individuals made whole and businesses getting back to business after suffering debilitating losses. An insurance policy is a promise. By keeping our promises, we have won the trust and business of insurers, brokers and agents across the country.
A misconception in the community is that we’re an insurance “agency” with a significant customer base in the greater Peoria area. When in truth we’re a national company with 27 offices from coast to coast—Los Angeles, San Francisco, Dallas, Chicago, Philadelphia, New York, etc.—that just happens to be headquartered right here in Peoria. Which as many companies already know, is a great place to have a national headquarters. IBI