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Home / Washington Business - July/August 2004 / Q&A - Mike McGavick: Safeco President Speaks Out |
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Q&A - Mike McGavick: Safeco President Speaks Out |
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Written On: July/August 2004 |
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Mike McGavick has been president of Safeco since 2001. He is best known for bringing Safeco back to financial health after a period of severe losses.
Prior to joining Safeco, McGavick held a number of executive positions at Chicago’s CNA Financial Corporation. He began his insurance career in 1992, when he became director of the Superfund Improvement Project for the American Insurance Association.
McGavick managed U.S. Sen. Slade Gorton’s 1988 campaign and served as his chief of staff from 1989 to 1991. In addition, McGavick has served as vice president of the Washington Roundtable and the Rockey Company, a Seattle public relations firm.
Born and raised in Seattle, McGavick graduated with a political science degree from the University of Washington in 1983.
Q: When you became president of Safeco, in 2001, the company was in real trouble. What were the problems, and what were your solutions?
A: First, there were just very difficult conditions in the insurance marketplace, country wide, really worldwide, which led to pricing that was below costs, and that always leads to poor results.
Second, Safeco had had a major transaction back in the mid to late ‘90s that put some real pressure on the company. While you can never second guess those kinds of decisions, the results hadn’t come in as expected.
The way we responded was to really focus on priorities that we laid out for people over and over. We were going to make sure we were only writing risks that we thought could produce a profit, and we were going to charge a fair price for that insurance.
Third, we had to clean up our balance sheets. Fourth, we had to get our expenses on line. Fifth, we had to rebuild our systems and our products for the future. We laid that plan out and got it done in 11 months.
Q: What were the most painful aspects of that transition?
A: By far, the most painful thing was that we reduced the size of the workforce of the company by 10 percent. At that time the company had 12,000 employees, and 1,200 were let go as part of that change.
The second most difficult thing was going out to our distribution partners and to our insurers and identifying whole groups either of agents or customers that we would no longer insure or no longer support.
Q: How can the lessons learned in turning around Safeco be applied to improving the state’s business climate?
A: Number one is to focus on where your advantages are and stop doing things or investing in things in which you don’t have an advantage.
For Washington, that implies focusing on our opportunity in bio-informatics and the fact that between the University of Washington’s research and the presence of Microsoft, we really do have a unique capability to be among the first tier of regions in producing solutions to the new medicines and really to the secrets of life that can advance life and the quality of life across the globe.
For the state, the pain comes in the form of finally living within its means and producing budgets that no longer take more and more resources from the people of the state.
If we don’t have a vision that compels people to want to come here, if we don’t have competitiveness in the tax structure, if we aren’t investing in the things where we’re really good, how are we going to compete with those other regions that have their act together?
Q: What is Washington doing right to create a positive environment for business?
A: Over the last decade the attention to education and the reforms that have been achieved there have at least turned the needle from the K-12 education system being a significant negative to being somewhere between a neutral and a potential plus.
The teeth in those accountabilities is to come. And I worry from time to time that we’ll blink before we require the accountabilities such as the WASL and some of the other reforms.
With the POG process, I think the governor really set himself apart from most governors. Instead of just saying, “Okay, the budget was ‘x’ last year, inflation was ‘y,’ clearly the next budget should be ‘x + y’ plus a little bit of stuff we want to do,” he started by saying. “The budget isn’t going to be ‘x,’ it’s going to be ‘x’ minus and against that smaller budget, on what should we really focus?”
That was the kind of budgeting the state has needed to undergo for a long time. Now I worry that having made that first bit of progress, people will think we’re done and think times are going to get good again — let’s rock and roll and spend like crazy again.
The third thing was the Legislature stepping up to the need for additional funding for the infrastructure of the transportation system. I do think they’re going to find they’ve put just a down payment into what needs to be done to make the roads safer and the entire transportation system more effective, but at least it was a healthy start.
Q: Two education reforms we’ve been hearing about are charter schools and vouchers. What are your perspectives on those ideas?
A: I remember hearing someone say, “Gee, charter schools are a failure because in some states where they’re engaged, they haven’t done as well as expected.” I thought that was interesting because it came from an educator in the current system.
The current system has had billions of dollars and a hundred years to get it right, and it hasn’t. For them to point the finger at charter schools, which are relatively new, as not producing everything they say they will, is to point the finger back to themselves for accountability for a system that in the last couple of decades has failed the test.
I am for more innovation and more creativity. Personally, I like the voucher idea because in essence it says, “Look, education comes in many forms, and it’s the public interest to assure the citizens are educated.”
Q: What are you most proud of during your years with Senator Gorton?
A: The most important things we worked on all surrounded natural resource industries, and how to give them the best possible opportunity to operate in harmony with our instincts to protect the environment. We knew our work was keeping communities going and alive. That was what gave us the most satisfaction, particularly smaller communities that were at risk of being overrun by, we thought, a misunderstanding between the urban centers of the state and its beliefs about what was right and wrong, and what was going on in the smaller communities.
Q: Getting back to Safeco, what do you see in the future for the company?
A: We believe Safeco could be one of the powerhouse national insurers. We don’t think we have to just satisfy ourselves by being one of the larger insurers in the Northwest. The mission is to be among the handful of competitors who survive the consolidation that is going on.
Q: Realistically, where do you think the state’s economy is headed?
I do think, in fact, over the next decade we’ll see an explosion in growth and presence of this whole bio-informatics area, including additional drug companies locating either operations or being headquartered here. I think you’ll see universities’ research capabilities expand. I don’t know whether we’ll really let the Port of Seattle grow to its full potential.
I see the state becoming more business friendly, but I don’t see it doing what it should do, which is become among the “Top 20” most business friendly states. It’s going to take a bit of pain before we figure out we’ve got to change.
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