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Specialty company, begun as a contact lens insurer, continues to be an innovator in other lines
When Gerald D. Stephens founded RLI Corp. in 1961, he was fresh out of college and working in his father's insurance agency in Peoria, Illinois. It occurred to him that there might be a market for insuring consumers against the loss of contact lenses, a product that was just in its infancy.
"At that time, it cost around $200 to replace a pair of lenses, and most of the people who wore them were young and couldn't afford to take that risk," Stephens notes.
While still with the agency, Stephens formed RLI Insurance Company-so named to stand for Replacement Lens Insurance. The company eventually captured 85% of the insurance market for replacement contact lenses. Gradually, prices of the lenses fell dramatically, and that insurance market dwindled. But by then RLI was a profitable specialty insurer with a broader product line, listed on the New York Stock Exchange, and doing business in all 50 states.
"The initials of the company constantly remind me that nothing is forever," says Stephens, who now is president of RLI Corp. "If we had continued to write only contact lens insurance, we'd be out of business today."
Aside from learning that markets can come and go, the contact lens experience also provided key disciplines that RLI uses in all the markets it has subsequently entered. "We continue to be very product focused and specialized," says Stephens.
The contact lens experience also taught RLI not to be afraid of markets that other insurers either haven't thought of or have chosen to avoid. Thus, RLI has created comfortable niches for itself selling standalone personal umbrella coverage, California earthquake insurance and homeowners in Hawaii. It also writes more traditional commercial property, casualty and surety business.
The financial results have been impressive. Sales of RLI Corporation, which includes RLI Insurance Company and its surplus lines subsidiary, Mt. Hawley Insurance Company, reached more than $300 million in 1997. In the 1997 annual report, Stephens says RLI is "on our way to a $1 billion company."
Profitability, the ultimate measuring stick, has been even more impressive. Its combined ratio has been over 100 only four times in its 37-year history....