State unrolls insurer-friendly plan: New strategy aims to recruit, nurture insurance businesses; watchdogs wary of approach

The state of Indiana is aggressively courting the insurance industry to add high-paying jobs to the economy, a strategy that comes with a touch of controversy.

The Indiana Economic Development Corp. announced late last month the appointment of Mike Chrysler as Indiana’s first-ever director of insurance initiatives. Chrysler then hit the ground driving.

He’s already visited the Fort Wayne market and plans to reach several other corners of Indiana to let insurers know the state appreciates their business and wants to help them prosper.

“That’s a key thing we haven’t done in the past,” he said. “It’s an industry that’s been taken for granted.” Eventually, Chrysler wants to recruit more insurers to Indiana. He and the economic development corporation tout Indiana’s premium tax of 1.3 percent-one of the lowest in the nation-and what they refer to as the state’s “favorable” judicial and legislative climate.

Recruiting efforts like these have been pushed in other states as well, and they’re the kind of thing that makes some industry watchdogs nervous.

“Encouraging people to come by telling them it’s a good climate for insurance companies can be interpreted as meaning, ‘We’re not going to bother you,’ if you know what I mean,” said Joseph Belth, a professor emeritus at Indiana Uni- versity and editor of The Insurance Forum, an independent periodical.

There is precedence for that line of thinking. A 1998 Wall Street Journal article labeled Indiana’s Insurance Department as one of the least effective in the nation.

However, Chrysler and Indiana Insurance Commissioner Jim Atterholt say the new position allows a clear separation of the state’s dual roles of recruiter and enforcer. They say the effort to add jobs will have no impact on enforcement of regulations.

Chrysler sees many reasons to nurture Indiana’s insurance business. For starters, it offers recessionproof jobs that don’t pollute.

The average annual salary in the field is $47,493, according to the Insurance Institute of Indiana, for which Chrysler lobbied before he started his new job.

More than 60,000 Hoosiers already work in the industry. Moreover, insurers often funnel premiums they collect into investments in their own back yard, such as municipal bonds for building projects that support the local economy.

“This is an industry that’s taxed higher and invests more than any other industry I’m aware of,” he said.

It’s also an industry Indiana has to work to keep. They’re not married to the state due to natural resources or anything like that, Chrysler noted.

“This is an industry that, for the most part, can be located anywhere,” he said, adding that economic and regulatory factors play a big role in location decisions. “What we’ve got to make sure is we’re responsive in that nature.”

A more responsive state government would be appreciated, according to Shawn Gibbons, a board member for the Indianapolis Association of Health Underwriters. He characterized past relationships between the industry and the state as “contentious.”

He noted, for instance, that slow regulatory approval for new products hampered insurers’ ability to quickly bring products to market.

Chrysler said the Insurance Department was seen as “unresponsive and uninterested” in protecting industry interests and focused exclusively on consumer protection.

Former state Insurance Commissioner Sally McCarty, who stepped down last year, doesn’t mind that characterization.

“I take that as a compliment because, in my mind, that was supposed to be my job, to exclusively focus on consumer protection,” she said. “I think that’s what the taxpayers paid me to do.”

The insurance industry has plenty of resources to promote itself, a task a regulatory agency has no business being involved in, according to McCarty.

“I think that work, appropriately, should go to the economic development agency of the state, not the regulator,” she said.

That work, for now, involves passing out handfuls of business cards and driving long stretches of Indiana highways. Chrysler wants to spread the word about tax incentives and training dollars available to help keep jobs in state.

He wants to talk with Indiana colleges and universities, especially Ivy Tech State College, to explore training opportunities. Better educational opportunities in the insurance field could benefit several lines of insurance, he said.

He also wants to understand insurer problems and what the state can do to help.

Chrysler expects these moves to yield few results in the near term, noting “for the most part, it’s just to provide a business card to let them know there’s another resource out there for them.”

In the long term, his job may take him out of state to recruit. He thinks insurers in Illinois and the Chicago area may want to move here. Kentucky, he noted, has a much higher premium tax than Indiana. And “we think Michigan is ripe for opportunities,” he said.

Whether this plan pays long-term dividends remains to be seen.

Insurance broker Greg Wright blames consolidation for most of the job loss Indiana’s insurance industry has seen since the late 1980s and early 1990s.

Neither the insurance institute nor the state Insurance Department keeps statistics that show job loss since then. But several companies-including Meridian Insurance Group Inc., which was once one of the state’s largest insurers-have been purchased by out-of-state firms.

In many cases, these companies moved closer to national money centers like New York and Chicago, said Wright of Indianapolis-based Consolidated Insurance Services. He believes help with a few more incentives may do little to stem that tide.

Wright would rather see Indiana focus on developing niche markets not covered by the consolidating companies.

Atterholt, however, said an “open door” policy from state officials can go a long way toward keeping jobs here. He cites that and a positive relationship with government officials as one of the reasons WellPoint Inc. located headquarters here after last year’s mega-merger with Anthem Inc.

Belth worries about the effect these efforts might have on enforcement. Chrysler’s job, he said, is exactly the opposite of the regulator.

“His function is to protect insurance companies, and one of the parties he needs to protect insurance companies from is regulators,” Belth said, adding that he doesn’t think the new position is a bad idea, “I’m saying it just makes me nervous.”

Chrysler plans to work with the Insurance Department, which is a short walk from his office at 1 N. Capitol Ave. Still, he insists a proverbial wall stands between the two entities.

Atterholt agrees. Chrysler’s job allows the state to move forward with economic development, and it allows the Insurance Department to keep its integrity as a regulator.

“I don’t believe having a friendly business attitude and being pro-consumer are mutually exclusive,” he said.