Appointments: New State head seeks to rid old 'plodder' image

Friday 2nd March 2001

STRONG BRAND: NRMA's strengths are in its strong branding and the quality of its people. 'I would have killed for a brand that strong when I was in the banking business', David Smith says

By Graeme Kennedy

Stripping the old plodding government department image from State Insurance is a high-priority task as new chief executive David Smith seeks more growth in New Zealand's $2 billion insurance market.

Mr Smith said the company was an innovative and flexible insurer but still carried the legacy of government ownership.

"It's very hard to change that perception. The customers we have think we are very good but those we do not have don't see us as being customer-focused. Their perception is of a slow government department.

"We have got to get rid of the old image. We want New Zealanders to see State as a great place to do business and to have service standards that meet or exceed their expectations."

State was privatised and bought by Norwich in 1990, merging with CGU in May last year to create CGNU as the UK's biggest insurance group. CGU had acquired New Zealand Insurance in 1998 and for strategic reasons decided to sell State, which Australia's NRMA Insurance Group bought this month.

NRMA began 80 years ago as a motorists' assistance service similar to the Automobile Association and five years later moved into insurance.

Mr Smith, a member of NRMA's executive committee, said the two companies were an ideal fit - both are their countries' biggest general insurers, with State having about 20% of the New Zealand market and NRMA 30% of private vehicles, 27% of compulsory third-party insurance and 14% of home and contents insurance in Australia.

"They are very similar and that was the big attraction, as well as gaining geographic expansion to get into another important market."

"NRMA's strengths are in its strong branding and the quality of its people - I would have killed for a brand that strong when I was in the banking business - and State is much the same with a strong customer base. That, fundamentally, was why we were attracted to the proposition.

"State's half-year result to December 31 was an after-tax profit of $31.3 million on premiums of $391 million. Over that time, the company was up for sale, which caused a lot of uncertainty among the staff.

"But despite that they came up with a quality result - that reinforced our decision to buy."

Mr Smith began his financial industry career in 1979 as a teller in a pre-Westpac Bank of New South Wales North Sydney branch, moving into human resources (HR) management before transferring to Palmerston North in 1987 as personnel officer.

"It was a fantastic time," he said. "It was the first time I had worked in a rural environment with its different pace, issues and pressures and I was able to manage my job and complete an undergraduate business degree at Massey."

He moved to Wellington as national HR manager before returning to Sydney in 1992 as Westpac was hit by a $1.7 billion loss.

"A huge event like that, though, presents enormous opportunities. A crisis challenges people's thinking as the existing ways of doing things are not enough to recover - you have to go out and reinvent the business, think about change programmes.

"I stayed with the bank and saw Dave Morgan [Westpac managing director and CEO] lead the recovery programme - it was the greatest work development I have ever experienced."

Mr Smith became the bank's chief manager for remuneration before being selected a Sloan Fellow to study for an MBA at MIT and returning to head the bank's institutional and investment group's HR operations. He was Queensland general manager for retail banking when NRMA Insurance CEO Eric Dodd invited him last year to join a management team demutualising the company for listing.

"The organisation was owned by the members and we had to unlock the value by becoming a shareholder insurance company but keep the member services - we had to separate the two. NRMA Insurance listed in August and is now ranked among Australia's top 30 companies."

Mr Smith was NRMA's HR general manager before taking the top job at State.

He said growth in the New Zealand industry was "fairly flat," with several large companies competing in a relatively small market. Total premiums last year were $1.9 billion, up from $1.8 billion in the previous year.

In the past State had not focused strongly on the broker sector and the company gained only about 9% of business from it.

"So we've got some great opportunities to capture more of the broker market. We've got to get closer to them.

"The short-term business is by its nature high turnover and the trick is to be a better provider to get the repeats and attract new customers.

"And the internet is not used much in insurance, although it suits the industry beautifully and will grow rapidly. A lot of development work has been done here and by NRMA over the past two years and we can leverage off that.

David Smith
Age: 40
Marital status: Married, three daughters
Pastime: Rugby, cricket, baseball

Comments from our readers

No comments yet