“Disciplined trading against a challenging market environment – and continued long-term investment in our transformation of esure.”
Efficiently summarising esure’s full-year 2022 results, CEO David McMillan (pictured) highlighted the complex market backdrop behind the Surrey-HQed motor and home insurance provider’s headline figures. Between increased claims frequency, claims inflation among the worst seen in 50 years, and numerous severe weather events – the UK market had a lot to contend with in 2022, he said, and he believes these challenges have been exacerbated by, “unsustainably low levels of market pricing”.
esure has engaged a dual approach to respond to these challenges – displaying proactive discipline in its pricing and underwriting approach while continuing to focus on its ambition to create the UK’s leading digital insurer. Discussing the latter with Insurance Business UK, McMillan noted that the insurer has invested over £60 million this year in line with its substantial platform investment strategy.
“That’s clearly impacted our profitability,” he said. “But we believe it will create significant value for both our customers and our shareholders in the longer term, and we're really delighted with the progress we've made during the year.”
At the core of esure’s continued strategic transformation is the ambition to become the UK’s leading digital insurer, through investment in building top-tier technology and data capabilities. It’s a multi-year radical redesign of how an insurance company should work, McMillan said, focused on transforming customer experience to make esure more efficient while also opening up new growth opportunities to create long-term value.
“And that’s on the back of a very flexible, connectable platform,” he said. “The key components to our platform are flexible, scalable technology that can quickly be changed, enhanced and developed. We think we're creating a superior and very rich data asset which is critical to having a forensic understanding of our customers, and the insurance risks that they face.
“We’re about creating pain-free or ‘beautiful’ digital journeys. I would say we're digital-first, rather than digital-only. We believe those digital journeys with an empathetic human touch is a winning formula. From a financial perspective, we’re in the process of generating a significantly lower cost model than we or many in the industry have had. And the thing I’m the most excited about is the culture around this and how we’re building a very non-hierarchal, agile, entrepreneurial culture which is exciting for our people to work within.”
At a time of such significant economic upheaval, the temptation to batten down the hatches and put a stopper in significant change programmes is understandable. But for McMillan and his team, while it’s not always easy to keep such ambitious projects on track, it is crucial. Between COVID, Ukraine, supply-chain challenges, inflation and the cost-of-living crisis, it has been a tough few years, he said, not just for the insurance sector but for businesses more generally.
“For us, having a very supportive board and shareholder, and one of the really positive things about being private equity owned is that you can build something for the long-term,” he said. “We’ve been very encouraged by our board and our shareholder and our team to hold the course. They believe in what we’re trying to build which has really encouraged us to go the distance.”
Looking at the inroads esure has made, McMillan said the insurer is delighted with the progress it has made and that 2022 proved a “seminal year” in terms of its transformation strategy – not least due to the launch of its new digital platform. And as a truly cloud-native platform, he believes esure’s new offering will advantage it both in terms of agility and costs. In 2022, the firm completed over 30 integrations with leading cloud solutions providers.
“But what does that mean from a customer experience perspective? It means all the customers’ history and data is in one place which allows us to deliver a truly omnichannel experience,” he said. “So whenever the customer touches us - whether it's via our portal, chatbot, telephony or email - the whole history of that experience seamlessly and dynamically transports from channel to channel.
“That's something I've been trying to do my whole career in more complex organisations, and we feel quite excited about what that's going to allow us to do in terms of customer service. We're doubling down on our self-service capability, trying to eliminate millions of more mundane interactions with customers and allow customers to self-serve. And we're trying to keep them much more dynamically appraised of what's going on.”
esure’s new platform now operates across all four price comparison websites – and at year-end had 50,000 new customers on the platform. As of March 31, McMillan noted that this number has risen to between 125,000 to 130,000 customers so its scale-up has been rapid, with the insurer now rolling out updates to its functionality on a fortnightly basis.
“In terms of our outlook from a transformation perspective, we think we’ve built something that's really quite special. And our main mission for this year is to evolve that to get our whole customer base, including existing customers onto the platform. That migration is paramount for us because we believe that it will unlock benefits for customers and also benefits from our financial perspective.
“From a trading perspective, we continue to be very cautious. We're still worried about inflation, we're still worried about the fact that we think the market is not quite priced for all the inflation that it has already seen and what we'll probably see in the rest of 2023. So, we'll continue to be quite cautious about that balance of pricing and volume growth.”
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