Michael Tipsord
State Farm CEO
Born in 1959, sitting State Farm CEO Michael Tipsord was raised among the rural pastures of central Illinois, in a tiny village named Cooksville; for reference, the most recent United States census counted 171 humans living there. Nonetheless, Tipsord is proud to share with Opportunity Nation that he appreciates having had his immediate family – including siblings, parents, and both sets of grandparents – all living very close by throughout his childhood.
“My grandparents lived through the great depression and I remember them all as extremely hard-working people,” he says. “Even though two of them didn’t get past the eighth grade, each of them emphasized the value of education to me. They instilled a sense of values [in me] regarding hard work, self-reliance, sacrifice, and respect for others.”
Tipsord’s parents got married young, his mother was only eighteen years old at the time, and receiving an education would prove difficult for both. His father served during the Korean War and fortunately earned a degree through the G.I. bill.
“My mom graduated college at the age of thirty, while expecting my younger brother and having two children under the age of eleven to watch over,” he recalls. “Their determination earned them the distinction of being the first in their families to graduate college. They served as role models for me, they always challenged me to be my very best.”
High School
Only because there are newspaper archives documenting Michael’s brother, Gary Tipsord, posing in a Fall 1984 team photo for the Octavia high school football team, we can only guess that Michael likewise attended Octavia throughout his adolescent years. This assumption is further supported by the complete lack of academic alternatives established near Cooksville at the time and even to this day; the aforementioned high school no longer operates as it was eventually renamed Ridgeview High School in 1989.
“As I look back, I’ve come to appreciate my family, my teachers, my coaches, and that small, tight-knit community for what it truly was,” he measures. “It was a group of people who cared about me, who wanted me to do better, who wanted me to actually achieve more than they were able to achieve for themselves.”
Illinois Wesleyan University
Michael Tipsord attended Illinois Wesleyan University in Bloomington, where he was a member of the Alpha Iota chapter of the Sigma Chi fraternity and graduated with a B.S. degree summa cum laude in 1981. He then went on to receive a J.D. degree in 1984 magna cum laude from the University of Illinois at Urbana-Champaign.
The Career of Michael Tipsord
Before joining State Farm as assistant tax counsel in 1988, Tipsord was a private practice attorney. During his earliest years at the insurance giant, he pursued further credentials to bolster his already impressive education, such as the Chartered Life Underwriter (CLU) designation in 1991 and the Chartered Property Casualty Underwriter (CPCU) in 1995, moreover, he is also a Certified Public Accountant (CPA).
The burgeoning Wesleyan alum certainly made an impression on leaders within State Farm, as he began a rapid ascension up their ranks that started with being named director of accounting for the company in 1995. Twelve months later, he became assistant controller, then executive assistant in 1997, vice president and assistant treasurer in 1998, vice president and treasurer in 2001, and senior vice president in 2002.
2004 saw Michael Tipsord enter the highest executive ranks as he was named vice chairmen and chief financial officer that year. Then came 2011, when he assumed the role of chief operations officer.
Working Alongside Ed Rust
Ed Rust Jr. was born in Bloomington, attended Bloomington high school, went to college at Illinois Wesleyan University (located in Bloomington), and eventually went on to succeed his father, Ed Rust Sr., as CEO of State Farm, a company which is a primary economic driver for and headquartered in, you guessed it, Bloomington, Illinois.
Needless to say, whether it was his glorious high school and collegiate wrestling days, the fact his father and grandfather had run the biggest company in town, or that he himself would go on to be chief executive of State Farm for a financially prosperous thirty years (1985-2015), Ed Rust Jr. was every bit a hometown hero if there ever really was one.
Barry Reilly, superintendent of Bloomington’s District 87 schools, said he has “known Ed since his son, Barry, attended Bloomington High School in the early 90s,” when Reilly worked in the building. “He’s just a great guy. He’s engaged in his own local community. He’s down to Earth. I think that’s really served him well in his role as CEO of State Farm and in his leadership in educational issues across the community.”
Rust Jr. has had a profound impact on his community, fueling initiatives from the Illini Data System that teachers use to track and forecast student academic progress to helping local leaders by keeping his promises to them that State Farm would support summer programs, donate equipment including laptop computers, and give grants to classroom projects.
“I have had the privilege to work side by side with Ed day in, day out, and those of you that know him, know he possesses so many positive attributes that it’s dangerous to focus on just one,” Michael Tipsord once remarked during an acceptance speech on Rust Jr.’s behalf. “Today we’re focusing on just one, the man has this steadfast commitment to ensuring that all children have the opportunity for a fruitful education system. He has a passion for furthering people’s growth.”
State Farm Chief Executive
Aside from several legal woes along the way, which is only natural for an insurance company, under Rust Jr.’s leadership, State Farm’s annual profits rose from a reported $428 million in 1989 to $4.2 billion in net income the year before he left; between 2000 and 2014, State Farm’s stock value steadily increased from $53 a share to $75 per share.
Furthermore, State Farm grew from 45 million policies to serving more than 82 million policies and financial services accounts. The company and its affiliates had managed to maintain their status as the largest provider of car insurance in the United States. In all, the impressively amassed force of 18,000 agents and more than 65,000 employees were gatekeepers to an organization whose financial strength soared from $10 billion to more than $80 billion.
Throughout its history, State Farm built a record on its ability to deliver automobile, other property and casualty, health, and life insurance at competitive prices. Per Funding Universe, this was achieved through keeping customers well-serviced, innovative marketing strategies, smart and financially sound business practices, lobbying in the political arena, and large-scale public relations campaigns.
On the heels of Rust Jr.’s retirement, Michael Tipsord was named chief executive officer in September 2015 and president earlier the same year. He was elected chairman of the board of State Farm Mutual Automobile Insurance Company in June 2016.
“Michael has a deep understanding of the opportunities and challenges emerging in our rapidly changing marketplace. During his 27-year career with our company, he has been a key leader in driving our continued growth and success,” Rust Jr. said. “In a strategic partnership, Michael has helped me chart State Farm’s future course as we evolve to meet the ever-changing needs of customers in an expanding and evolving marketplace.”
Decisions by Michael Tipsord
State Farm reported a net income of $0.4 billion in 2016, compared with $6.2 billion of net income in 2015. Keep in mind, results in 2015 included $3.0 billion in realized capital gains due to two corporate mergers impacting stocks owned within the unaffiliated stock portfolio, even still, the net income decline marked a rocky earnings start for State Farm CEO Michael Tipsord.
Then came the 2017 announcement that the company planned to exit eleven facilities across America, in stages and over the course of several years, beginning in 2018. The work from these facilities is in the process of being moved to the company’s headquarters in Bloomington, its offices in Atlanta, Dallas, and Phoenix, as well as a number of other existing locations. These changes have affected approximately 4,200 of the company’s employees.
“The company’s decision to exit these facilities was based on efforts to best serve customers by gaining efficiency through streamlining and improving processes, leveraging technology, and concentrating employees in larger locations,” State Farm explained in the statement. Although seemingly a big deal on its surface, the news wasn’t too jarring as staff at these shuttering regional offices were given ample time to prepare and had job opportunities in other State Farm locations.
Tipsord and his staff righted their earnings report woes with a documented net income of $2.2 billion in 2017, and a subsequent net income of $8.8 billion in 2018.
U.S. Bank Strategic Alliance
Part of a broader strategy by State Farm to exit banking operations, the insurance giant made public the arrangement of a strategic alliance with U.S. Bank, the nation’s fifth-largest bank, whereby U.S. Bank will assume State Farm Bank’s existing deposit and credit card accounts. Co-branded cards would be issued to members, along with a variety of new, easy ways for these State Farm customers to manage their banking needs.
“U.S. Bank is an outstanding institution that shares our commitment to strong customer relationships,” said State Farm CEO Michael Tipsord. “When we combine State Farm’s deep customer relationships with the scale and capabilities of companies like U.S. Bank, we can help significantly more people.”
According to The Pantagraph, within the State Farm portfolio of business, chiefly insurance services, the bank contributed $59 million, or about 1%, of the $5.6 billion profit that the company earned in 2019. It was also disclosed that the two companies were exploring working together to provide State Farm customers with access to vehicle loans and business banking products.
Consumer Financial Relief
With pandemic life taking hold, State Farm declared in April 2020, that in order to help policyholders get through such challenging times, they’d institute up to a $2 billion dividend that would go to its auto insurance customers. With schools and businesses closed, and many Americans sheltering in their homes, the company figured people were driving less, which meant they’d return some value to customers as fewer auto claims could therefore be anticipated.
“One of our top priorities has been to find a way to provide relief for our customers,” Tipsord told The Wall Street Journal. “We will continue to monitor this on a go-forward basis. If these shelter-in-place orders continue for a longer period than I think they will, we may be dealing with a similar situation [in the future]”
State Farm’s program, which purportedly benefited about 21 million households and was applauded for being on the high end of the relief provided by consumer programs. Their “Good Neighbor Relief Program” offered a 25% policy credit on premiums due from March 20 through May 31, 2020, or about $20 a month for each vehicle insured. Customers didn’t need to take any action to receive this dividend, which appeared as a credit on their auto policy.
State Farm reported profits of $3.7 billion in 2020. The net worth for the State Farm group ended that year at $126.1 billion compared with $116.2 billion at year-end 2019.
“The Good Neighbor Relief Program is a testament of our commitment to our policyholders and communities. Whether premium relief, dividends to State Farm Mutual auto customers, payment flexibility, or philanthropic efforts in the communities we live and work, we’re focused on relief and recovery efforts,” said Senior Vice President, Treasurer, and Chief Financial Officer Jon Farney.
Looking Toward the Future
Self-driving tech is not yet nimble enough to reliably handle the variety of situations human drivers encounter each day, The New York Times concludes in a recently published piece outlining the concept’s tempestuous obstacles. It can usually handle suburban Phoenix, but it can’t duplicate the human sense needed for merging into the Lincoln Tunnel in New York or dashing for an offramp on Highway 101 in Los Angeles.
Regardless, the development of this technology weighs on the minds of auto insurers all over the world, especially when considering a Stanford University study found 90% of automobile accidents are caused by human error. Removing the human from the driving equation could mean far fewer accidents, which translates to far lower risk, and that could trigger far lower rates, ultimately resulting in, a far lower revenue stream.
“Our industry has long been supporters of improved highway safety, improved vehicle safety and it [self-driving tech] has the real benefit of reducing personal injury; so this is something that we support,” Michael Tipsord said during a chat at the 2017 FinTech Ideas Festival. “But this was shocking to me, the average age of vehicles on U.S. highways right now is over eleven years old. Hardly any of those have the autonomous capabilities we’re talking about. So you have the existing fleet we’re gonna have to work through.”
He also mentioned that there could be adoption issues stemming from consumers not being comfortable with going completely driverless or even sharing a vehicle in the midst of a futuristic smart city utopia powered to life by the “Internet of Things.” Overall, it’s the inherited responsibility of executive leadership teams across corporate America to adapt their business models to meet the needs of consumers in the market today and aim for the demands of those in the future.
On a final note, Tipsord consistently offers the following words of encouragement to his own children, “Always remember, others do not define you, you and your actions define you. In this regard, never presuppose that you can’t accomplish something. Never underestimate your own potential. Continue to push yourself to reach your highest potential and you will be well-positioned to succeed. Expect great things of yourself and the world around you, and many times, you’ll be pleasantly surprised.”
If you enjoyed this story on the life of State Farm CEO Michael Tipsord, be sure to check out our biography of Cigna CEO David Cordani.
