Q It's been quite a roller coaster in this current marketplace. What's your take on this extremely soft market and what do you think caused it?
A I believe the soft market was caused by carriers pursuing cash flow and seeking short term investment profits by not adhering to sound principles of pricing and underwriting. Even though there has been little inflation recently, repair costs have increased steadily and were underestimated by most carriers. Investments by many carriers have been reckless as well.
Q There has been numerous insurance organizations, both large and small, that have gone out of business or have been bailed out by the government in the past year. What do you see happening to our industry in the next 12 months? Same question, 3-5 years?
A There are a number of small, medium and even very large carriers on the edge and we could have several surprising failures over the next year. As a general rule, when a carrier is improving, things are better than they project. Conversely, when going downhill, things are usually much worse than that shown on the surface.
Q It would make sense and has been speculated that a hard market is in our very near future and will most likely stick around for a while. Do you agree and how is RMIS preparing for it?
A We have been more conservative than our competition during this soft market and have responsibly protected our carriers. We have had our major auto markets for over 25 years which is quite unique in our industry. We've also had our commercial markets for over 17 years. We have maintained profitability for our carriers during the soft market and we will be prepared with tremendous capacity for growth when things turn around. When things get tough, you will be able to turn to RMIS.
Q RMIS hasn't always been on the cusp of keeping up with technology like say, Progressive, yet many feel that it's a necessity in these times to embrace it. What has RMIS recently done to take steps forward in this area and how do you plan to keep up in the future?
A During the past few years we have done a lot with our website, our software and our hardware. We are moving toward a point of sale capacity and hopefully that can be accomplished within the next year. Progressive is a terrific company with a great record. Their ease of handling and service are spectacular. However, their pricing tends to be high, their commissions low and they have the capacity, based on past events, to move in directions difficult for producers. They will be around for the hard market of course, as will Mercury and other responsible players.
Q In our highly competitive industry in California coupled with the evident soft market, many programs seem to be leaving money on the table, giving away the store so to speak. How can that in any way be a sound, profitable business decision and how do you deal with it knowing your rate may be more "appropriate"?
A There have always been markets that bought business. We don't do that. It used to be one or two at a time buying business. Now it's ten to fifteen. It is frustrating not to be able to grow, but growth for RMIS will be substantial as the market turns and many of the bad actors will disappear.
Q Part two of the last question: It seems like a very tricky balancing act to make money for our companies while appearing competitive to the insureds, especially with the economy how it is. How difficult is it juggling the wants and needs of both the companies we represent and the brokers/insureds that choose us? As we know, a rate that may look attractive to a company very possibly could be both visually and financially repulsive during a sale.
A It is indeed a balancing act. As a result of so much competition, carriers tend to write business in their own "sweet spots" on the rater. In a soft market, price tends to drive the market. When the soft market collapses, which it will in 12-18 months, the business will be driven to the responsible players with capacity that are left standing. As an example, our program with ICW offers limits up to $250/500/100 and up to $300,000 on physical damage. This is a solid A rated carrier we've had for 26 years and have maintained responsible pricing and underwriting during this soft market. RMIS ICW will be the market you will truly value when things go the other way.
Q Let me draw up a scenario for you. We have a couple on their first date. The "highly competitive California insurance industry" is our knight in shining armor. Timidly walking by his side is our lovely lady which will be our "soft market". All the while and annoyingly leaching on to both, we have the bothersome 3rd wheel which will represent "the dreadful economy" we are currently in. What you would expect to happen is the lovely lady would become more comfortable, hence evolving into a "hard market" while our knight in shining armor would continue on, never changing and embracing the change of his date. Historically, that is the cycle of this situation. My question is can this timid lady ever become comfortable with the 3rd wheel still lingering? It's widely known that the industry needs a hard market to follow a soft market to balance things out, but is it even possible with the presence of a terrible economy?
A The awful economy and, more specifically, the scary investment situation should hasten the departure of the soft market as carriers will not be banking on huge investment returns and will be licking their wounds from prior investment losses. Profits will have to be secured through underwriting profit. That means tighter underwriting and higher pricing.
Q Many people would like to know; When, Where and How did RMIS originate? Feel free to mention the stepping stones leading to RMIS as well.
A I started my insurance career in 1964 with Fireman's Fund as an underwriting trainee after majoring in Math at UCLA. I am a California native. Over the next 14 years I held the positions of Underwriter, Underwriting Supervisor, Underwriting Auditor, Rate Analyst, Underwriting Manager, Sales Manager, Claims Manager, Branch Manager and Regional Vice President. I moved from Fireman's Fund to Mercury, then to Transamerica and on to Reserve Insurance Company. My last position was that of Regional Vice President with Reserve who was a specialty lines carrier. I had a staff of 300, but the corporate politics were getting old, and I had always wanted to give the MGA business a try. I felt I had a stronger background then the MGA's I knew so on April 10, 1978, I founded RMIS. We got our volume to $40 million within the next 10 years and have been between that level and $120 million ever since. We even reached 300 employees in 2001 during the last hard market.
Q What's it like to control a "Family Run" business? Does it make things easier or more difficult?
A RMIS is indeed a family business, and also a business that keeps its Managers for many years. There is a balance and some special issues in a family business, but family is a great enhancement to our business and I'm proud of the contribution that has been made by all. My three children, Laura, Bob and Steve, have been with the company for 25 years and hold key positions of Operations Manager, Underwriting Manager and Personal Lines Manager. My brother John is head of our Claims Operations and has been with us for 24 years. Ben Bailey, my step-son, heads our Marketing Department and has been with us for 10 years. We have other family in long term positions in both Claims and Underwriting. The benefits of a family business far exceed any drawbacks.
Q In business, what has been your greatest success? Same question, failure?
A The longevity of RMIS, the long term carrier relationships and the long term career paths RMIS has provided for people I love and respect have been our greatest successes and things of which I am the most proud. Whenever you have to downsize due to the marketplace some good people can be lost, and this is always difficult. My biggest mistake was partnering with a particular carrier for a short time many years ago which was very harmful to RMIS at the time. That carrier shall remain nameless.
Q Throughout the years, what has been the most difficult thing to deal with?
A The most difficult thing is always the inept or greedy carriers in the marketplace which turn things upside down and, for us, a stable business, create too much variance in staffing in the changing marketplace. It takes discipline not to chase business with improper rates and to continue to underwrite always.
Q Picture yourself on a stage with an open mic, speaking to your entire broker base. What do you say to them?
A Thank you. Thank you for supporting us with your business for 31 years. Without you RMIS does not exist. I know sometimes you all wish we would follow some of this crazy pricing and underwriting (or lack of it) but trust me, please, our being responsible will enable us to be there for you when times get tough, and they will. All of us here at RMIS appreciate and are thankful for your business and, of course, we plan to be doing more business with you in the very near future. Maybe even as soon as August 1 with our new changes to RMIS ICW. Update those raters. (he says with a smile...)
Q I'm sure you saw this coming, but I've saved the hardest question for last. How do you explain the longevity and success of your business, your employees and your producer force?
A I suppose I could say it was my charm, movie star good looks and perfectly toned physique that were the keys. However, my sometimes-utilized nickname of "SpongeBob BigPants" seems to run contrary to at least the last two of those qualities. Seriously, I have had a great deal of insurance management experience in a lot of disciplines and I have had a number of great teachers. I am committed to treating employees and producers the way I would like to be treated: fairly and with respect. As one of my idols, John Wooden once said, "Success is peace of mind which is a direct result of self-satisfaction in knowing you have done the best of which you are capable."
Thank you for your precious time...SpongeBob BigPants.
