Des Moines Emerges as an Economic Hub
When most people think finance and insurance, they don’t necessarily think of Des Moines, Iowa. But they probably should.
There are hundreds of metropolitan areas in the United States, each of which has become increasingly specialized and known for its strength in a particular industry or sector. In the diverse economy of Des Moines, Iowa, that specialty would be insurance.
Des Moines is, after all, a global hub of the insurance industry, trailing only Hartford, Connecticut and megacities like New York. All told, the insurance industry accounts for roughly 16% of the region’s jobs, with more than 80 such businesses requiring all kinds of skilled workers and laborers. How does a city roughly 43 times smaller than the Big Apple maintain such a vaunted position in the sector’s pecking order of urban centers?
Lured initially by its economic history and favorable state taxation policy, conglomerates such as ING and Nationwide quickly recognized that the cost of doing business in Des Moines is often significantly less expensive than New York, for example, where an amalgam of federal, state, and local taxes often proves to be prohibitively costly, particularly for companies operating within heavily taxed and regulated industries like insurance and finance.
What is specialized insurance and why has it become the bread and butter of Des Moines’s burgeoning economy? As Matt Anderson, the city’s assistant general manager, told Free Enterprise in a recent interview, specialized insurance is available to essentially any kind of business. “We have a lot of specialized insurance companies, with ones focused primarily on insuring things like chiropractors and churches. Since there’s only a handful of companies out there doing it, you can essentially grow a big business out here by specialization,” Anderson explained.
“In addition to very large firms such as Principal Financial Group and Employers Mutual Company, which have been headquartered in Des Moines for over 100 years, ING and Nationwide also have strong presences out here, which has helped a lot in terms of creating a stable jobs market. They initially acquired some Des Moines-based insurance companies, but they quickly realized we have a low cost to doing business, and we have a very educated and productive workforce.”
As Anderson tells it, Des Moines and the state of Iowa have not rested on their laurels. While lawmakers at the state level continue to work to hone policy and adjust the regulatory environment to attract more new businesses, Des Moines also actively works to lure companies from across the state. At the heart of this movement sits the Greater Des Moines Partnership, a public-private organization that, according to Anderson, acts as a kind of economic development group “on steroids.”
The Greater Des Moines Partnership recruits new businesses and urges existing companies to bolster their local presence. Since 1999, in fact, the public-private partnership has played a hand in helping more than 450 projects that either expanded or moved to the metro area. In total, such development has generated more than 23,000 jobs, according to the group, all while attracting nearly 150 new businesses. The Greater Des Moines Partnership is also able to offer companies contemplating a move to the Des Moines metro area a host of services otherwise not available—providing help with everything from finance and human resources to real estate and marketing.
Thanks to its strong education system, its educated workforce, and its well-run government—USA Today ranked Iowa as the fourth best-run state in the U.S. in 2014—companies don’t just move to Des Moines, they expand. The Principal Financial Group, for instance, is currently investing more than $400 million to completely renovate its corporate offices in downtown Des Moines, a move that’ll likely lure additional investment and residents over the coming decade.
Though it’s benefited from its history, Des Moines is a testament to the possibilities that can come when public and private groups collaborate in an effort to continually drive economic growth and improve the standard of living. It doesn’t take long to see how these kinds of investments are paying off: In various lists compiled by Forbes Magazine, Des Moines ranked as the top city for young professionals, the best for up-and-coming downtown areas, and the second-best for jobs.
Neither the state’s business community nor its government agencies have any intention of losing those distinctions anytime soon. Taxes are low for a number of industries—aside from a 1% insurance premium tax, the state has no premium taxes on the sale of annuities, qualified insurance plans, or surtaxes on insurance carriers, among other favorable policies—and both the state and local organizations are beefing up their investment in infrastructure and services.
The Des Moines strategy is paying off: Among others, Symetra Financial Corp. announced last year that it would move operations to Iowa after it encountered an unfavorable regulatory climate in its home state of Washington. “We’re looking for a level playing field to more effectively compete with other life insurance companies,” a Symetra spokeswoman told Bloomberg News of the company’s major decision.
With more and more businesses—particularly insurance and financial services companies—taking the plunge and moving to Des Moines, and public and private organizations working together to create a better business environment, city and state lawmakers are confident that Des Moines will continue to cement its position as a go-to hub of industry and innovation.
This is the first part of our multi-installment, year-long #SiliconCitiesUSA Series
What Is #SiliconCitiesUSA?
Over the course of this year, we’ll explore how entrepreneurs and businesses are faring in non-major U.S. cities, beginning with Des Moines, Iowa. We’ll be reporting on the ground from each city, talking with elected officials and business leaders about how they’re harnessing their unique resources and local talent to fuel economic growth and better compete against more established urban centers like San Francisco and New York City.