Making Hartford shine again as insurance capital

While other states from Minnesota to New Hampshire compete to attract the insurance sector by lowering premium taxes and extending incentives, Connecticut thinks it has the best offer: an unmatched talent pool of insurance managers, underwriters and actuaries.

Connecticut government, academic and industry leaders are working together to leverage the state’s insurance talent pool, selling the state as a Silicon Valley for insurance, as one professor has described it, in an environment of consolidation, globalization, outsourcing — and competition among states for the high-paying, white collar jobs.

Despite the high-profile takeover of Travelers by St. Paul and Travelers Life by MetLife, insurance is still the top employer in the state, responsible for more than 65,000 paychecks, according to the Connecticut Department of Labor. Another 100,000 are employed in jobs servicing the insurance industry. The combined insurance and financial services provides 22 percent of all jobs in the metro-Hartford and 8 percent of all jobs in the state.

Connecticut still has the most insurer headquarters with more than 70 property and casualty and 32 life and health insurers domiciled here. Companies with a sizable presence in Hartford include Aetna, Genworth Financial, Hartford Financial Services, Hartford Steam Boiler Inspection and Insurance Co., The Phoenix Companies and St. Paul Travelers.

While that’s an impressive roster, the job growth from this sector has been disappointing thus far this decade. From 2000 to 2003, the state reported less than 1 percent growth in insurance jobs. From 2003 to 2005, it lost more than 2,500 insurance jobs.

Officials believe the state can do better in building upon its base of insurance employment.

Insurance cluster
The Insurance and Financial Services Cluster is among the key players in selling Connecticut as a desirable location for insurance companies. The cluster is led by members of the industry and supported by educational and government institutions.

According to the head of the IFS Cluster, Robert Flynn, the state’s workforce should give it an advantage. “The thing is, we have the highest concentration of insurance underwriters in the nation and things like that are top-notch in terms of what people are looking for.”

It’s not just the numbers of workers that Connecticut officials tout; it’s the productivity and caliber of these professionals. According to the labor department, worker productivity in the state is 23 percent above the national average. The state’s workforce is highly educated and well trained. Connecticut ranks third nationally in the percent of population over age 25 who hold a bachelor’s degree or higher.

At the same time they promote the job base, these experts acknowledge that insurers weigh factors in addition to the talent pool. At 1.75 percent, Connecticut’s premium tax rate happens to be competitive. Proximity to New York, Boston, Washington and major transportation hubs works in Hartford’s favor.

High vs. low cost
But the state’s high overall cost of living (the average insurance carrier salary in the state was $96,647 in 2005) complicate the sales pitch.

“It’s just something that executives put into their equation and then it comes out and it looks like negative,” concedes Flynn.

While high costs don’t help, selling a state as the cheapest for salaries or taxes doesn’t always work either.

“That will only work for a short period of time because there will always be this global marketplace and there will always be another country, another state that can do it cheaper,” says Barbara Fernandez, who was named last year by Gov. M. Jodi Rell to lead the insurance development office within the Department of Economic and Community Development. The office was set up following the job losses from the Travelers and MetLife merger.

Fernandez, whose 25-year insurance career includes a stint as assistant vice president for international business at The Phoenix, maintains Connecticut’s insurance sector is well positioned for globalization. “I’ve learned that with insurance companies who make decisions about where to locate, it is not an ‘either or.’ They, the big ones, tend to look at it as a global continuum. So it is, ‘I have a business that is located globally in many different parts of the world and where does Connecticut fit in that continuum?’ What a lot of employers are saying … is where we fit is at the very high-end knowledge base. We have insurance company employers where the average salary is a $120,000. The reason for that is they have the people here that can do the product design, the high-end underwriting, the risk management, the research, the very high-end claims work. So they place here those operations and those pieces that require that knowledge.”

While global carriers are certainly desirable, Connecticut appreciates smaller companies as well. “There’s more growth in the smaller companies, the specially companies, the really boutique type companies,” Fernandez contends.

Policymakers hope the state’s newer, smaller insurers including One Beacon Professional Partners, Darwin Professional Underwriters and Guilford Specialty Group, will add jobs.

The main job of the IFS cluster is to convince power brokers and residents that the industry is an important part of the state’s present and future, according to Flynn. It hasn’t been an easy job. “The academics took a while to really understand that if they shifted some of their research focus, or their curriculum focus, that they would have better opportunities for their students, or better research for their faculty. From the policymakers’ point of view, it’s been difficult … educating them and building awareness that the industry plays such a critical role. I had to do a lot of the research to show these people that insurance and financial comprises one-third of our gross state product, and making them understand that if we grow that industry, that the overall economy would grow.”

The IFS cluster isn’t 100 percent effective. Last year, its legislative priority was the interstate compact to streamline the approval process for life and annuity products. It has passed in 26 states — but not in Connecticut. The group has also urged lawmakers to permit captives and to eliminate a 6 percent tax on law, actuarial and other service firms that insurers use — measures that have stalled.

The state’s major achievements have been in the area of education. With encouragement from the cluster, the University of Connecticut has increased the number of insurance courses. The cluster also worked with Capital Community College to transform its customer service training so that it focuses on insurance.

Working with the University of Hartford, the group initiated a program to support insurance entrepreneurs. “What we found was a number of people that were leaving insurance companies wanted to start their own operations, so we, through the Entrepreneurship Institute, we were able to kind of coach them on the business aspects of starting new firms,” said Flynn.

Perhaps the biggest victory has been the IFS University. The U.S. Department of Labor awarded $2.748 million to a partnership that will create the university over the next three years. The partnership includes Capital Community College, the DECD, and the IFS Cluster.

Critical occupations
The industry has identified four critical occupations — financial managers and analysts, accountants and auditors, agents and brokers, and actuaries — which are projected to grow and require ongoing skill enhancement. The grant provides funding to develop a curriculum that will provide the skills training required for the four occupations. It will develop the first Associate in Science Degree in Insurance and Financial Services to be offered at the community college level.

According to Brian MacLean, chief operating officer of St. Paul Travelers and chairman of the IFS Cluster, “The primary competitive advantage that Connecticut’s insurance and financial services companies have is our talent. This IFS University initiative will ensure that we nurture that talent for the future, enhance our delivery of creative products and services, and expand our ability to compete in global markets.”

There has been some good news recently. St. Paul Travelers is adding 600 positions in the state and The Hartford currently has more than 700 job openings.

Looking ahead, the Connecticut Department of Labor estimates that the insurance industry in the state will grow 8 percent over the next six years, with Hartford adding more than 2,000 new insurance jobs by 2010.

Eight percent growth might not be impressive when matched against claims of other states. But Fernandez says these trends must be placed in the context of a state that already has a lot of insurance jobs.

“One of the things that people say, ‘Well, this state grew by 20 percent; your state grew by 2 percent.’ But you have to remember the base that we have. We have a very large, mature industry. So the state that grew by 20 percent, well they had two insurance carriers. … A 50 percent growth means they have four. OK?,” the DECD executive said.

It’s important to be realistic about growth in the insurance sector, according to Fernandez. “They (insurers) are not going to have Internet type growth rates. It’s a business that if it grows as the economy grows, and it adds 3 percent or 4 percent on top of that, that’s very healthy,” she says.