L.A.'s insurance exodus: how the largest insurance center west of the Mississippi got pulled apart and exited its Wilshire Boulevard home.

INSURANCE broker Bill Newton still remembers the days when he would step outside his mid-Wilshire office building and walk over to the Windsor restaurant or the HMS Bounty or Taylor's Steak House and have lunch with a prospective client--only to find himself surrounded by fellow brokers.

"They were all doing the exact same thing: wining and dining their clients," Newton remembered. "The underwriters were trying to get business from brokers and the brokers were trying to sign their clients up with underwriters."

In the after hours, local watering holes were jammed. Most popular was the landmark Brown Derby Restaurant on Wilshire Boulevard and Alexandria Avenue, where every Tuesday evening the insurance industry would gather for drinks.

"Everybody who was anybody in the insurance industry in the Western U.S. was there," said Mark Wells, an industry veteran who now publishes the Insurance Journal.

Today, Wells publishes his journal in San Diego, while Newton moved his office a few blocks west to the Miracle Mile. Indeed, not a single major insurance firm has a significant presence on that stretch of mid-Wilshire--what was once home to the largest concentration of insurance-related firms west of the Mississippi River.

Only two companies, Farmers Insurance Group and Mercury Insurance Corp., remain close to the area, with their headquarters a mile to the west in what's known as Park Mile. All the others either left or got bought out and consolidated outside the corridor in what became one of the largest corporate exoduses in L.A. history.

Only the signs remain: the "Equitable" letters etched into the Equitable Plaza tower at Wilshire and Mariposa and the Pierce National Life sign outside an office tower near Western Avenue.

Disappearing from mid-Wilshire

It wasn't just the insurance carriers that left. Brokerage firms abandoned mid-Wilshire as well, as did insurance defense law firms and other service companies that catered to the insurance carriers.

"It was really quite amazing. Within five years in the late 1980s and early 1990s, the whole insurance industry practically disappeared from mid-Wilshire," said Bill Newton, chief executive of insurance brokerage Lemac and Associates, which itself moved to the Miracle Mile in 1991.

Several factors pulled the local industry apart: a deteriorating neighborhood, repeal of state tax credits, changing technologies that allowed insurers to function virtually anywhere with much smaller staffs, and an industry-wide consolidation.

Of course, the insurance business didn't totally disappear from Los Angeles. Companies that once had been concentrated on mid-Wilshire have scattered in all directions--to the San Fernando Valley, Glendale and Orange County.

Today, one of the largest concentrations of insurers is in downtown L.A., just blocks away from mid-Wilshire. They include Aon Corp., Chubb Insurance Group of Cos. and Marsh McLennan Cos.

But even in these new locales, the offices are generally smaller and the employees fewer, as shown by a sharp drop in insurance industry employment in L.A. County. This past June, there were an estimated 56,000 people employed in insurance and related industries in Los Angeles County, down from an estimated 70,000 in 1990, according to the state Employment Development Department.

In the 1940s and 1950s, when Hollywood and aerospace were considered the crown jewels of L.A.'s economy, insurance was becoming a power player, as well. It made sense, considering that post-war Los Angeles was the growth center of the West Coast (San Francisco was a more mature financial market). The industry itself was experiencing a period of rapid growth as both life insurance and health insurance became more widespread. Many companies set up or expanded existing offices on Spring Street in downtown L.A.

By the late 1950s, as insurers were outgrowing their downtown offices, city planners were envisioning a "new downtown" in the mid-Wilshire area, filled with insurance and other financial services companies. At the urging of local officials, state lawmakers reduced the tax burden for any insurance company that built and owned a regional headquarters in the state, a tax break specifically geared toward mid-Wilshire.

Over the next 15 years, more than two dozen insurance companies moved into office towers they had commissioned on mid-Wilshire, turning the corridor into "insurance row." Among the well-known names were Travelers Insurance Cos., Equitable Life Insurance Co., Wausau Insurance and Beneficial Standard Insurance.

Seeds for exodus

At one point, some 50 insurance companies, along with scores of brokers, wholesalers, insurance defense firms and other related businesses lined the boulevard. They catered almost exclusively to the corporate world, from Fortune 500 companies to small family-owned businesses, selling property and casualty insurance as well as liability and life insurance.

"It was a very intimate community. You couldn't go into a restaurant for lunch with a prospective client without seeing a dozen of your competitors doing the exact same thing," Newton said.

But it wouldn't last. The seeds for the exodus were sewn in the late 1970s, when Gov. Jerry Brown repealed the premium tax deduction. Suddenly, insurance companies had no financial advantage to owning their own buildings.

When 10-year leases came up for renewal in the late 1980s at rates of around $2 a square foot, many insurance companies sought newer office towers and cheaper rents. Some, like Fireman's Fund, moved out to Woodland Hills. Others, like Safeco, moved to newly renovated Brand Boulevard in Glendale. Still others, like Marsh, moved to the downtown financial district.

There were other factors, too. Computers, e-mail and faxes allowed insurance companies to streamline operations. With the fax machine, for example, underwriters no longer needed to be near the central offices to hand-carry documents for signing. Later, computers replaced thousands of claims processors throughout the industry.

Several waves of consolidation--where large established national companies purchased local companies--also prompted the closing or downsizing of offices.

"You had a real acquisition frenzy, especially in the late 1980s, after the hard market of the mid-1980s collapsed. To grow your business, you basically had to acquire other companies," said Davis Moore, president of Worldwide Facilities Inc., an insurance brokerage that has remained in mid-Wilshire.

Among the local companies that have sold out to national players: Pacific Indemnity Insurance Co., which was bought by Chubb Group of Insurance Cos.; Beneficial Standard Life Insurance, which was sold first to California Federal and then to Cannel Indiana-based Conseco Inc.; Swett & Crawford brokers (purchased by Aon Corp.); and Pacific Employers Group, which was bought by Insurance Co. of Noah America (and which, in turn, was acquired by Cigna Corp.).

"In the late 1980s, after the liability insurance crisis, you had a lot of competition among companies all chasing after the same lucrative corporate accounts. That's when the larger companies began to swallow up the smaller ones," said Candysse Miller, executive director of the Insurance Information Network of California, which represents insurers.

Meanwhile, the mid-Wilshire neighborhood changed. Korean and Latino immigrants poured in, traffic worsened and, especially in the late 1980s, crime spiked. It became more difficult to go to local watering holes like the HMS Bounty pub or the Red Onion restaurant without running the risk of having your car broken into. A fatal gang-related shooting at a corner gas station at Vermont Avenue and Seventh Street also served as a wake up call.

"A lot of my clients were out of there by the late 1980s because crime shot up. When an employee gets mugged, you know it's time to go," said Dena Kaplan, associate publisher of the Insurance Journal.

What's more, many of the middle managers and agents who ran the insurance operations on mid-Wilshire had bought homes in the suburbs and had to contend with increasingly long and harrowing commutes to get to their offices.

"An area that became very popular for underwriting was Glendale. All these new buildings had gone up on Brand Boulevard and it was geographically desirable for a lot of the agents and managers who lived in the Valley," said Moore.

What holdouts remained into the 1990s were chased away by two major difficulties: the tearing up of Wilshire Boulevard for the construction of the Metro Red Line subway and the 1992 riots.

Consolidation craze

By 1993, virtually all of the insurance companies and related businesses that had lined mid-Wilshire fled the area, except for Farmers and Mercury and a handful of brokers. After a severe downturn, mid-Wilshire eventually rebounded as a mix of Korean businesses (including some Korean insurance firms), non-profits, government agencies and vocational institutions replaced the old-line insurers.

Yet even in their new locales, the frenzy of consolidation among insurers continued throughout the 1990s. For example, huge national insurance brokers such as Marsh & McLennan and Aon swallowed up smaller independent brokerages. As a result of this latest wave, downtown L.A. has emerged as the largest concentration of insurance-related businesses in the area, coming back nearly full-circle to where the industry was 50 years ago.

How long these insurance companies will remain downtown is an open question, especially as lease rates rise, traffic gets worse and parking becomes more expensive.

Mike Harris, a spokesman for the California FAIR Plan Association, which sells insurance to higher-risk clients, said things could conceivably change back to the way they were.

"Who knows, in a few years, the whole cycle may repeat again," he said, "with mid-Wilshire becoming once again an insurance center."

Where They Are

A handful of large insurers have remained in the L.A. area, but few are on mid-Wilshire.

1. MERCURY GENERAL CORP.

Lines: Commercial auto, homeowners, umbrella, mechanical breakdown 4484 Wilshire Blvd. Los Angeles 90010

2. SCPIE HOLDINGS INC.

Lines: Professional liability 1888 Century Park East Los Angeles 90067

3. 21ST CENTURY INSURANCE GROUP

Lines: Auto, umbrella 6301 Owensmouth Ave. Woodland Hills 91367

4. UNICO AMERICAN CORP.

Lines: Property/casualty, liability, workers' compensation, directors 8, officers, errors & omissions, homeowners, auto, umbrella, recreational vehicle 23251 Mulholland Drive Woodland Hills 91364

5. WESCO FINANCIAL CORP. Lines: Property/casualty, banks 301 E. Colorado Blvd., Suite 300 Pasadena 91101

6. ZENITH NATIONAL INSURANCE CORP.

Lines: Workers' compensation 21255 Califa St. Woodland Hills 91367

7. PAULA FINANCIAL

Lines: Property/casualty 27 E. Green St., Suite 206 Pasadena 91105

8. FARMERS INSURANCE

Lines: Auto, homeowners, life, business, financial services 4680 Wilshire Blvd. Los Angeles 90010