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Indiana insurance industry weathers hard times

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Headlines in the local insurance industry have been as ugly as the rest of the economy.

Indianapolis-based WellPoint Inc. announced 1,500 job cuts nationwide back in January.

Then in March Indianapolis-based OneAmerica Financial Partners trimmed 114 jobs, and swooning investment values pushed Carmel-based Conseco Inc. to the brink of financial disaster.

Deteriorating finances led Grain Dealers Mutual Insurance Co. to sell itself in July to a Florida firm.

Last month, WellPoint made at least 30 more job cuts and says it isn’t done.

But behind the news, the insurance industry has had a remarkably good year. Overall employment in the industry hasn’t budged an inch since September 2008 and, if anything, has added a few jobs, according to data from the U.S. Bureau of Labor Statistics.

More than 46,000 Hoosiers work for insurance carriers, agents, brokers and third-party insurance service firms. Nearly 26,000 of those are in the Indianapolis metro area. Both totals are unchanged from a year ago.

“Insurance, honestly, is probably one of the most recession-proof occupations that people could get into,” said Carol Cutter, commissioner of the Indiana Department of Insurance and a former insurance agent.

Meanwhile, overall local and statewide job markets have plunged. Nearly 136,000 fewer Hoosiers are working now than a year ago, with 35,000 of those losses coming in the Indianapolis area.

The unemployment rate in Indiana earlier this year topped 10 percent, higher than any time since 1982. Unemployment in Indianapolis peaked at 8.7 percent.

Indiana’s insurance industry suffered job losses during the recessions of 1991 and 2001. And the state’s insurance industry kept losing jobs during the first half of this decade, even though their counterparts nationally added them.

Since 2006, however, the slack has been picked up in large measure by out-of-state companies looking to write more business in Indiana. And that trend continues.

That’s why Illinois-based Allstate Corp. launched a campaign in May to sign up 55 new agents in Indiana. It has added 12 so far, bringing its total agent presence here to 216 agents, who employ another 378 people.

Allstate itself employs 455 in Indiana, most of them at a claims center in Indianapolis.

Like many national insurers, Allstate has increased its investment in landlocked Indiana in response to the scary losses in hurricane-prone coastal states.

“With the uncertainty of those monster hurricanes, Allstate has decided in a few areas not to sell homeowners’ [policies]. That’s not the case here in Indiana,” said Allstate’s David Kaehr, vice president of sales for Indiana.

The growth of out-of-state insurers helped Indianapolis-based Ouellette & Associates. The third-party claims adjusting firm hired two new people in the last year and opened an office in Vincennes. The firm is getting hired by more out-of-state property insurers that want to do business in Indiana but don’t want to directly employ staff here.

“I’ve heard of a lot of out-of-state carriers that have targeted Indiana,” said President Matt Ouellette. He added, “It’s a win-win for the Indiana agents and brokers, as well as the independent contractors.”

MJ Insurance, an Indianapolis agency, hired three people in Indiana in the last year as it expanded to reach new niche customers such as infrastructure construction firms and metals manufacturers.

“We’re not necessarily dedicated to one particular market,” said MJ President Jon Loftin. He added, “We’re even trying to get more niche-focused.”

Insurance hubs prove resilient

Insurance centers around the country have held up well during the recession—in contrast to such banking hubs as Charlotte, N.C., according to the Metropolitan Policy Program at the Brookings Institution, a Washington, D.C., think tank.

In a June report, Research Director Alan Berube noted that “metro areas specialized in the less-affected insurance industry, such as Des Moines, Hartford, and Omaha, have experienced very modest job losses and have performed relatively well on most other economic indicators.”

Indianapolis used to be able to name itself in that crowd of insurance hot spots. In the middle of the 20th century, Indianapolis rivaled Hartford, Conn., as a hub for insurance companies, according to the “Encyclopedia of Indianapolis.”

The state extended a helping hand to insurers during the Great Depression and reformed its insurance laws, making it exceedingly attractive when the economy boomed after World War II.

But as in so many other industries, Indianapolis lost more than it gained in the corporate consolidation of the past few decades.

Insurance employment spiked locally in 1999—right about the time Carmel-based Conseco Inc.’s acquisition run came to an end.

It also was right before the tech bubble burst—also bursting the bubble for insurers, which had been able to add customers by cutting prices and yet grow profits with huge investment returns.

“There was a strong reliance in the insurance industry on the investment income,” said Marty Wood, vice president of the Indiana Insurance Institute. “They got a little bit away from underwriting. Therefore, they had to tighten their belts.”

While Conseco’s local employment has plunged from 3,200 in 1998 to 1,750 now, that was offset by the coast-to-coast buying spree staged by Anthem Blue Cross and Blue Shield—which formed today’s WellPoint.

In 2000, the company employed 3,100 Hoosiers; today, it’s up to 5,100.

The company has added 200 positions in Indiana in the last year, even as it trimmed its work force nationally.

Series of setbacks

But the growth of WellPoint has not been enough to offset the loss of insurance jobs this decade due to acquisitions or departures.

American States Financial Corp. sold in 2001 to Seattle-based Safeco Corp., which still employs about 480 in Indianapolis.

Safeco was acquired last year by Boston-based Liberty Mutual Insurance Co. Liberty Mutual is consolidating Safeco’s Indianapolis employees from its downtown office to Liberty’s Indiana Insurance unit’s office at East 96th Street and Keystone Avenue.

Other victims of acquisitions included Indianapolis Life Insurance Co. and Meridian Insurance Group. Around the state, Lincoln National Corp.’s move from Fort Wayne to Philadelphia was a big loss.

“That’s some of what we lament here in Indiana. Some of our strong domestics have been merged and acquired by other companies,” said Wood of the Indiana Insurance Institute.

After Gov. Mitch Daniels came into office in 2005, he charged the Indiana Economic Development Corp. with pursuing more insurance jobs. But that effort is largely stalled, as the position overseeing the effort has been vacant nearly a year.

But the insurance industry still contributes significantly to the state economy.

A study commissioned three years later by the Insurance Institute concluded that the industry pays wages 53 percent above the state average and accounts for 2.4 percent of the state’s total economy—ranking Indiana 17th in the nation.

The study’s author, Purdue University economist Kevin McNamara, wrote, “While the insurance industry faces continued competitive pressures, it remains a vital, vibrant component of the Indiana economy.”•

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  • Insurance Article
    JD,

    Might find something of value in the article. More to follow. MBilger
  • Are you sure about this?
    I don't think all of this is accurate. Nationwide Insurance is doing major cuts across the company and will be closing down the majority of all their offices even here in Indiana. So I am not sure that this is a recession proof industry. Other companies are doing the same thing I think you need to recheck your sources.
  • You forgot Golden Rule
    THE insurance company of Indianapolis, now owned by UnitedHealthcare. The previous Pat Rooney years inventing MSAs and HSAs? The affordable options? The controversial decisions and recissions? Haven't you read the news lately?

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