By Phil Zinkewicz
A delegation from Wanxiang America Corp.--a U.S.-based subsidiary of Wanxiang Corporation of Xiaoshan City, China--meets with owners of the Horton Insurance Agency in Orland Park, Illinois, to sign the joint venture agreement between the two companies. Shaking hands are Pin Ni of Wanxiang and Glenn Horton of The Horton Agency.
The globalization of the insurance industry has been the subject of a good many trade press articles and conference speeches in the last decade. There is no question that regulatory trade barriers are breaking down in different parts of the world and insurers, even some regional companies, are looking to overseas shores for expansion. Twenty years ago, there were perhaps a handful of insurers actively involved in international insurance transactions. Today, there are many more. Of course, the reason is clear--insurers' clients, even small to medium-sized manufacturing and services firms, are traversing international waters to tap new markets, and those clients need international insurance coverages and expertise.
At times, it seems as if the independent agent will have to be left out of all this activity. After all, independent agents, including those who operate on a national level, are used to dealing with domestic regulatory issues and products that pertain to exposures on this side of the Atlantic and Pacific. However, one independent agency believes that need not be the case.
Just last April, The Horton Group, the Chicago area-based company that owns the Horton Insurance Agency and other subsidiaries, signed an agreement with Wanxiang America Corp. to form a new entity called Wanxiang-Horton to service American and Chinese companies doing business in China as well as Chinese companies doing business in the United States. The joint venture plans to open a representative office either in Shanghai or Beijing during this summer. As part of the deal, Wanxiang America, based in suburban Chicago, has made an undisclosed investment in The Horton Group, giving Wanxiang America approximately a 10% stake in the company.
According to Glenn Horton, president and CEO of The Horton Group, independent agents and brokers in the United States should look hard at expansion plans overseas in order to better serve their clients who are at the present time expanding in that direction.
"In the middle market--let's say firms with between 100 and 1,000 employees--it's often difficult to find insurers to handle their international insurance needs, especially in China. The large, what used to be called alphabet brokers are certainly capable of providing the expertise and the necessary coverages, but they are not focused on this smaller and medium-sized market. Those of us who have dealt with this market can give more attention to the needs of this market."
Initially, the plan is for Horton's joint venture to provide risk management, international insurance, loss control and safety and claims management services to middle-market businesses. Types of insurance it will offer include property, workers compensation and automobile insurance.
Wanxiang America also hopes to achieve several goals with the joint venture. As one of the largest companies in China--Wanxiang is the world's largest manufacturer of after market universal joints and has interests in hotels, banks and even an eel farm operation--the firm has substantial insurance needs, said Pin Ni, president of Wanxiang America. "We need to have better service. The Horton Group provides the knowledge and experience we don't have." Ni said also that this venture fits into Wanxiang's plans to diversify into worldwide financial services.
One might well wonder how this marriage came about. After all, even though The Horton Group boasts $30 million in revenues for the year 2000, it is a Midwest-based agency with no apparent international ties. Here we have to look at The Horton Group itself and its philosophy for growth.
In 1982, Glenn Horton and Frank Poppie purchased the Horton Insurance Agency in Orland Park, Illinois, from Glenn's father and uncle. At that time, the agency revenues were around $300,000. Glenn and Poppie--by the way, they are still partners today--then embarked upon a growth program that included acquisitions and new business production. "It's true that we went from $300,000 in revenues in 1982 to $30 million last year, but what is significant is that we grew from $5 million in revenues in 1996 to the $30 million today," says Horton. "Our growth comes from putting money back into the agency. We believe that an agency has to develop expertise in many different areas instead of restricting itself, and we believe that agency representatives have to focus on all those areas." he says. Those areas include quality management, client focus, technology skills, producer development, marketing and so on," he says.
It is clear, then, that The Horton Group is not satisfied with resting on its laurels. Seeking opportunities for long-term expansion is of the utmost importance to the group, and going international was the next step. "Our movement into the international arena is the result of being in the right place at the right time," says Horton. "A lot of things just came together. First, it was apparent that the world economy was opening up and that companies were becoming international. By that I mean companies in the middle market, not just the large corporations. It was also apparent that the major brokers with international expertise were not serving this middle market well. Their concentration was on the Fortune 500 or Fortune 1000 companies. They weren't really looking at the smaller firms that had perhaps only 10% of their business overseas. So, we recognized that a need was there."
--Glenn Horton
Add to that scenario the fact that Horton's firm was and still is doing business with a law firm that had a good many Asian company clients. The law firm was also doing business with Wanxiang. It was at a social gathering that Horton met some of the representatives of Wanxiang-America and he found that their philosophy is that financial services--banking and insurance--is the driving force behind the success of manufacturing firms, especially those that want to enter into the world marketplace. "We made many friends from the Asian community," says Horton, "and the rest, as they say is history."
Getting a license to operate an insurance entity in China is not the easiest thing to do, according to Horton. "First you have to establish a relationship with a Chinese firm and establish a representative office in China," he says. "That representative office is not allowed to write insurance business immediately. It is there for forming business relationships, doing research and learning about the culture. Initially, we will generate revenues by writing insurance for Chinese companies coming into the United States and U.S. companies entering into China. But, in the long term, we hope to write business for companies that are operating in China."
Horton believes strongly that independent agents and brokers should become more well versed on international developments and opportunities. "Many brokers are intimidated by the thought of doing business in the international marketplace, but they don't have to be. They worry that they don't have the contacts, don't understand foreign cultures. But there's a lot of support out there. Companies such as Chubb and AIG, which have been international players for a long time, are willing to help their producers. Once you get into it, it is not nearly as frightening as it might seem at first."
Horton, whose agency was named Rough Notes Marketing Agency of the Month in August 1996, says he has only dipped his toe into the international scene. "We are determined that our international expansion will not be limited to China. It's a big world out there and our clients are moving into different parts of that world every day. We want to be with them on the trip." *