Recently, Insurance Journal sat down with Alan Kaufman, chairman, president, and CEO of the H.W. Kaufman Financial Group and its subsidiary, Burns & Wilcox Ltd. As chairman, Kaufman has played an active role through a number of mergers and acquisitions for a number of companies, agencies and managing general agencies that are involved in the specialty insurance lines industry, including Floyd West & Company, Howard James, Service General and Rathbone, King & Seeley Insurance Services, among others. Founded in 1969 by Kaufman’s late father, Herbert, Burns & Wilcox ranks as North America’s largest independently-owned insurance wholesaler. Below are excerpts from that interview.
Dave Thomas: Where do you see Burns & Wilcox in today’s industry and tell us about your focus in California and Texas?
Alan Kaufman: I think we’re certainly on the forefront in the underwriting side. A little over 70 percent of our business is underwriting and the remaining portion is brokerage, specialty marketplace, which is rather unique for a company our size. Most of our competitors that are our size dominate the brokerage area. We have 30 offices in 23 states. We’re strong in both California (five offices) and in Texas (two offices). The California marketplace still has a ways to go to harden in many areas, which is good news for us. One example is professional liability. We found that the market started to harden in other parts of the country before California and we see California as still yet to grow as far as hardening. Texas hardened well before California. There’s more capacity in California and more competition, not to say Texas doesn’t have its share of competition, but not like California. We think California is a healthier climate than it was two or three years ago despite all the competition. In both Texas and California, we have specialized products and underwriters that bring different talents to the table. We’re well-rounded to handle the diversified insurance specialty marketplace that we see in both markets. We have acquisitions on the table in both states and we’re looking to grow substantially both by acquisitions and internal growth. We’re looking to bring in more talented underwriters with specific expertise in certain fields so we can continue to expand in both states.
Dave Thomas: Have any of the major issues impacting the industry in California and Texas affected the company?
Alan Kaufman: The mold issue certainly has been a problem all over the country. It started in Texas and does make it interesting to find the right insurance company. There, we’re writing business on a non-admitted basis with an exclusion. You have to be creative in writing insurance in California, especially with the litigious society it is. Mold has been less of a problem for us in Texas. The ability to write homeowners’ insurance with exclusions in Texas is easier than California because the Texas regulatory environment allows you to write it on a non-admitted basis and 75 percent of the homeowners’ policies written in Texas are non-admitted. The mold problem exists there but the state seems more receptive to writing with limited coverage.
Dave Thomas: What would you say are the major differences in the industry today from when your dad started the company back in 1969?
Alan Kaufman: The cycles have continued historically. The recent soft market lasted longer than anyone anticipated before it really changed in the last couple of years. Prior to that, we saw cycles that were shorter. What’s changed is that the topic of insurance company solvency has become an issue. I think there were many more opportunities as far as markets and capacity back in the ’70s and ’80s. There were more reinsurers then and there are fewer today and that makes it difficult. As a far as good news, there is more state regulation to see that companies are reviewed on an ongoing basis. The public benefits from this because the closer scrutiny builds the credibility of the companies and eliminates concern about the solvency issue. Also, competition is enhanced. Companies have also changed as far as products. Today, they’re focusing on specific products more than they use to. The I.T. area, directors & officers, etc. bring new demands and challenges to the forefront than they use to. As for mergers and acquisitions, for some people it is a great time to sell. That has changed in certain parts of the country and I think there will be a change as far as who is owning what. Currently, it is in vogue for banks, financial institutions to own insurance companies or more self-insurance agencies, especially retail agencies. Eventually banks will take a position of ‘what are we doing in the insurance business we’re in the banking business?’ My prediction is that as banks go through their cycles of acquisition and become bigger and go from regional to national and international, those banks will eventually sell off some of their insurance divisions and that will have an affect on the marketplace. Technology also wasn’t an issue of any major consequence back then. My dad, had great foresight with technology. He tried to introduce it back in the ’70s. We just completed our technology integration program that took us 18 months to move among all the branches. We can now relay different underwriting information to our carriers and agents. Our company is completely connected so when I’m dealing with our office in San Diego, it is like dealing with people down the hall.
Dave Thomas: What did your father pass on to you as far as being successful in the insurance industry?
Alan Kaufman: He was heavy on character, integrity and leadership. His word was his bond. Many of his acquisitions were based on not necessarily on the issue of was this going to be a good acquisition because of profit number one, but who he was going to associate with. Many of the acquisitions we made were good acquisitions not only because it produced a better bottom line, but because of the name we kept, and what it represented in the marketplace.
Dave Thomas: What would you say is the greatest challenge or challenges for today’s independent agent?
Alan Kaufman: Probably the number one challenge is the capacity of markets. Both retail agents and the wholesale marketplace challenge is to have insurance markets to fit the demand. It is difficult to find companies because there are fewer insurance companies and companies are demanding more from their agents. There is more sophistication and technology needed in order to communicate. In order to do business today, agents will need to be more sophisticated and have more markets. We try to meet our agents’ needs that are changing quickly. Agents today want and expect more technology. The challenge for a retail agent is where to know to go quickly to get results for their client.
Dave Thomas: How has your background as an attorney helped you in the insurance industry?
Alan Kaufman: The legal background has been very helpful. I have practiced law for a number of years and am still a partner in the Kaufman and Payton law firm. You’re looking at risk and the potential for litigation, so as a lawyer you know the ramifications of what happens from that risk when it goes sour. My sense of writing profitable business is heightened by my understanding of the cost of litigation and its implications on the business.
Dave Thomas: How do you see the future of Burns & Wilcox in the coming years?
Alan Kaufman: We want to continue with solid growth, not growth just to grow. We want to continue to ask ourselves when we grow…will this move fit into our strategy talent wise, location wise? We look at both large and small acquisitions, to us, they’re all important. We’re looking at broadening outside the United States. We’re seeing more of a demand to do business outside the country. Countries across the globe, for example today have error & omissions concerns for people involved with the technology, selling it on a worldwide basis.
Burns & Wilcox Ltd.
Largest independently owned specialty insurance wholesaler and MGA in North America.
Contact: (800) 521-1918 or www.burnsandwilcox.com
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