Insurance industry engine keeps Iowa’s economy stronger

By Dave DeWitte, The Gazette

Allen Williams sometimes wished Iowa was better known back when he traveled the country to recruit businesses for the Iowa Department of Economic Development for more than eight years.

He sometimes yanked out a map that he could use to locate the state for executives in New York or California who'd never had much reason to seek it out.

But when Williams spoke with insurance executives, Iowa was already on the map.

“In the insurance industry, there is a recognition and understanding that, yes, it is a very big center,” said Williams, a project manager for IDED who now works with other economic sectors.

A total of 93 insurance companies were headquartered in Iowa as of November 2010, according to IDED, including some of the nation's largest.

The industry brought 28 facilities projects, 7,200 new jobs and $890 million in new investment to Iowa in the 14 years from 1996 through 2010.

Because of the number of corporate insurance headquarters, the jobs they have created tend to be higher paying, with salaries rising faster than most other industries.

A 2008 Iowa State University study found that Iowa's insurance jobs pay 68 percent more in wages and salary than the average Iowa nonfarm job, with an average wage and salary of $54,590 per year compared to $32,400 for all nonfarm jobs.

The insurance industry had 2.6 percent of the state's jobs, but generated 5.6 percent of the contribution to the gross state product, according to a 2008 report by David Swenson and Liesl Eathington of ISU's Department of Economics.

Insurance carriers that move operations from the East Coast benefit from lower costs in Iowa, Williams said. A savings of 10 percent to 15 percent is common due to lower real estate costs, living costs and, consequently, lower payroll costs.

Insurance company offices dominate the skyline of Des Moines, making it difficult for members of the state General Assembly to forget the industry's economic importance. Des Moines was home to 60 percent of the state's 41,100 insurance jobs in 2010, according to the IDED report.

Gov. Terry Branstad, known from his previous administration as sympathetic to the industry, supported and signed a bill in the 1980s that vastly improved Iowa's competitiveness in the insurance field by eliminating the state premium tax on annuities, noted Paula Dierenfeld, executive director of the Federation of Iowa Insurance Companies.

The 26-member federation represents life and health insurers.

“He always focused on the growth of the insurance industry and made it a high priority,” said Dierenfeld, who concedes she might be a bit biased because she worked for the Branstad administration. “He made many law changes that invented the growth in the industry.”

In the 1990s, Williams recalled, then-Gov. Tom Vilsack signed a bill that lowered taxes on insurance premiums from 2 percent to 1 percent.

“In Iowa, the legislature understands it's an important industry, a source of good-paying jobs, so it's not adversarial,” Williams said.

“It's an important industry in our state, and it has a significant amount of influence,” said State Sen. Rob Hogg, D-Cedar Rapids.

But, as a member of the senate judiciary committee during his nine years in office, he couldn't recall any blatant power plays by the industry.

Two major insurance headquarters and several smaller ones are located in the Corridor.

•  AEGON USA, which sells life insurance products, grew from 2,400 jobs in 2001 to 3,700 current full-time jobs in Cedar Rapids, according to Cindy Nodorft, communications director for the carrier.

The company acquired the former McLeodUSA Technology Park in on C Street SW for $27 million in 2005 to provide more elbow room, and now has $86 million in land and buildings in Cedar Rapids.

•  United Fire & Casualty, which provides property insurance, has grown to more than 400 employees in Iowa, expanding into more office space and a new parking facility. The company is poised to grow even more following the $191 million acquisition this year of Mercer Insurance, which will bring it into the life insurance business and greatly expand its geographic markets.
•  Des Moines-based life insurance and investments company Principal Financial Group employs about 200 in Hiawatha, Williams said.
•  GEICO, the nation's third-largest passenger automobile insurer, employs about 380 at a Coralville customer service center. The company said in March that it plans to expand its Coralville staff by 100 over the next year.

Des Moines has been vying with Hartford, Conn., for top honors as the nation's top insurance center, a title that has long been held by Hartford, Williams said.

In addition to Principal Financial, Des Moines is home to the state's largest health insurance company, Wellmark Blue Cross-Blue Shield. It is also home to major segments of British-based Aviva and Netherlands-based ING.

The decisions by several national or international insurance companies to expand and invest in Iowa after acquiring Iowa-based companies attests to the state's strong insurance climate, Williams said.

Many feared that Columbus, Ohio-based Nationwide Insurance Companies would consolidate operations of Des Moines-based Allied Insurance after it bought the large property carrier in 1998. But Nationwide promised 400 jobs in exchange for government assistance to build a new headquarters, and delivered many more.

It also appointed many onetime Allied executives to many key positions within the company, Williams said.

One advantage of Iowa's focus on insurance has been the industry's resiliance in the face of recent turmoil in the national economy.

“It has been pretty darned resilient,” Dierenfeld said.

She said some carriers had to reorganize and fire workers, but in fewer numbers than most of the financial sector.

That strength may be due to the relatively cautious financial nature of insurance companies, Dierenfeld figured.

One of the fundamentals of the business is that insurance companies must be able to manage investments conservatively enough to ensure that future claims can be paid. As a result, she said, Iowa insurers generally steered clear of many of exotic investments such as mortgage-backed securities that brought down some of the giants of the financial sector.

Perceptions have dictated that insurance isn't the top career choice for many Iowa high school graduates, however. Williams said that's unfortunate, because the industry is known for hiring and promoting many promising individuals without specialized degrees.

He said the reticence is probably due to the fact that most people identify career opportunities in insurance with sales. In reality, jobs run a wide range from sales to actuaries, product developers, marketing specialists and fund investors.

Williams said he spoke to one insurance business recruiter who told him that he could never get a full slate of appointments to talk with potential recruits at college campus visits if they heard the word “insurance.”

“But when they say the word ‘financial services,' everybody signs up,” he laughed.