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Who needs Hartford, Conn., when you have Columbia, S.C.?

The past decade has seen a convergence of insurance technology talent in this Southern capital to rival that of any city in the country, even Hartford, which has been billing itself as the nation's insurance capital for as long as anyone can remember.

At least a dozen more are on the way, according to economic development officials.

Why are cutting-edge technology companies serving the property/casualty insurance sector setting up shop in the middle of South Carolina instead of Palo Alto, Calif.; Denver; Atlanta; or New York City, the nation's financial services capital?

"It's a relatively progressive community in the South to people tired of Northern winters," says Doug Roller, CEO of Duck Creek Technologies, a Bolivar, Mo.-based insurance technology firm that opened an office in Columbia last September and also has offices in Connecticut.

Duck Creek, the distributor of the popular Example technology platform that helps carriers transform their products into Web-enabled services, employs about 30 people in the Columbia area, out of a total company workforce of 250 people.

Columbia and its surroundings offer lots of golf, beloved by the insurance crowd. Mountains are two hours to the west, the ocean two hours to the east. The quality of life is very high, and the cost of living low compared with Atlanta, for example, or Boston's Route 128 corridor.

The region also benefits from a healthy degree of diversity. In 1997, according to U.S. Census data, more than 22 percent of companies in the region were owned by women, and 16 percent of companies were minority-owned.

But the real reason so many property/casualty insurance technology firms are located there is because of the talent pool, technology executives say. The talent has been there ever since the founding of a former property/casualty technology pioneer called Policy Management Systems Corp. in Blythewood, a northeast suburb of the capital.

PMSC flourished in the early 1990s, employing 6,000 worldwide in its heyday. But the company stumbled after it had trouble generating enough interest in a client-server version of its software.

The sale of PMSC's successor, Mynd Corp., to Computer Sciences Corp. in December 2000 meant the layoff of dozens of software technicians and skilled managers who subsequently found it more convenient to stay put instead of chasing opportunities in other parts of the country, executives say.

"Instead of leaving, they started opening offices," says Cecil Bordages, vice president of property/casualty solutions marketing with CSC, who's been living in South Carolina for almost 10 years.

Lee Fogle, vice president of sales, property and casualty insurance products for CSC, which markets the popular Riskmaster risk management software suite, doesn't mince words when it comes to the kind of insurance talent located around Columbia.

"It is, without a doubt, the largest concentration of (insurance) technology talent outside of Hartford anywhere," says Fogle, himself a PMSC alumnus.

Dozens of line managers, senior managers and C-suite titans of the current crop of technology firms are PMSC alumni: Paul Butare, CEO of AcroSoft; Ronald (Rod) J. Giess, president of SpeedBuilder Systems; and Eddie Jones, senior vice president of marketing and product management at Fiserv Insurance.

"It's one big incestuous business," says Giess, also a former PMSC executive. His company, SpeedBuilder, is designed to help carriers and managing general agents get their products to the market faster.

Behind the panoply of the technology firms operating in and around Columbia stands "serial innovator" G. Larry Wilson, founder of PMSC and former chairman and CEO of Mynd Corp.

Wilson is now a partner with Pequot Ventures, an investment arm of technology investment giant Pequot Capital Management.

Many of the insurance technology startups in the Columbia area in the past decade have Wilson's stamp of approval, and he's probably got another "eight or 10 companies up his sleeve," says Neil McLean, a consultant with South Carolina's Council on Competitiveness, an initiative geared toward bringing more business into the state.

"What's exciting to us is the potential for future growth," says McLean. "Larry Wilson's now a principal in Pequot Capital, and he's in charge of insurance investment."

Wilson also serves as director of The Trelys Fund, a Columbia-headquartered venture capital investment group that focuses on startup and mid-stage companies across industry sectors.

Nor is Columbia without some heavy-hitters on the carrier side, which provide a built-in demand for technology expertise.

The city's home to Southern Mutual Church Insurance Co., a liability, commercial auto and workers' comp carrier covering 6,800 churches in North Carolina, South Carolina, Georgia and Tennessee; the South Carolina Farm Bureau; Colonial Supplement Insurance, a life subsidiary of Unum with 2.5 million policies in force; and Blue Cross Blue Shield of South Carolina, one of the state's largest employers with 12,000 employees, with offices also in Virginia and Texas.

Blue Cross Blue Shield of South Carolina, the executives also say, is particularly tech savvy among the Blue Cross Blue Shield family of health insurers in that it even helps other Blues with their technology systems.

South Carolina Blues' third-party claims-administration subsidiary, Planned Administrators Inc., even processes claims for large self-insured employers.

McLean, citing recent market research conducted on behalf of the council, says of the estimated 10,000 financial services-related jobs in and around Columbia, nearly all of them are related to insurance technology.

The insurance technology sector, he says, is one of the three or four areas that Columbia can develop long term.

Over the next six years, he believes, the 10,000 or so jobs related to insurance technology could grow by 25 percent.

McLean also "feels certain" that South Carolina's commanding position in the captive insurance industry plays a role, if only in the background, in providing an incentive for insurance technology companies to relocate.

The state boasts the lowest unionization rate in the country, 3.7 percent, according to research by Forbes magazine.

"I can't think of any other place that has people as experienced at what we do, which is the property/casualty marketplace," says Roller. "Hartford has a larger property/casualty core, but Columbia has a larger technology core."

Not that Columbia area boosters would even think of taking their property/casualty insurance goldmine for granted.

When technology firms come scouting for new locations, it's not unusual for Indianapolis; Columbus, Ohio; and Des Moines, Iowa--all of them located in states that host big-time insurance carriers, to give Columbia a run for its money.

Chamber of commerce boosters and regional economic development officials are aware that, if they want to keep their insurance technology gems within the state's borders, Columbia and the rest of South Carolina will need more training programs offered through either the state university system or local technical colleges.

The vendors themselves have realized they need to keep the talent, hence the creation of CSC's Pace program, which trains 20 to 25 new recruits at a clip.

Even when talent does jump ship to another firm, the chances are good that the new employer will be located in the Columbia area, executives say.

The cost of losing companies to competing communities, on the other hand, is expensive--a lesson that even Columbia, ironically, knows all too well.

Back when fledgling PMSC was looking for new office space, the city declined to offer PMSC the tax break it wanted to set up shop downtown.

So PMSC went to the city outskirts in a community known as Blythewood, and today Blythewood usually ends up on the short list of locations for many startups looking to settle in the region.

CYRIL TUOHY is managing editor of Risk & Insurance®.

November 1, 2007

Copyright 2007© LRP Publications