Big Interview: David McMillan, Esure

Between his non-executive directorship of the Scottish Rugby Union, his weekly 10K runs and maintaining his (at the time of interviewing) 240-day Duolingo streak – David McMillan finds the time to run Esure, the digital-first insurer he took the reins of in 2019.

We faced typical challenges in managing relationships between London and Paris, and we also had a joint venture in India that wasn’t very profitable and involved difficult relationships with our partner.

Before his current role, McMillan began his career as a management consultant, before joining the insurance industry as Aviva partnerships director in 2002. 

He then rose through the ranks to become CEO of Aviva businesses in continental Europe, Turkey, and India, before joining QBE as its chief operating officer.

McMillan says he “certainly learned a lot” at Aviva and described the “difference in terms of cultures” as challenging. 

He says: “At the time, Aviva France was the second biggest business in the group after UK life, so it was quite a lot bigger than UK general insurance.

“We faced typical challenges in managing relationships between London and Paris, and we also had a joint venture in India that wasn’t very profitable and involved difficult relationships with our partner.

“Every job offers opportunities for learning and development, but that period was especially challenging and required a great deal of resilience.”

Following his appointment to the top job at Esure in 2019, he immediately embarked on a journey of transforming the firm’s digital propositions. 

He tells Insurance Post that Bain Capital, Esure’s parent company, saw “a market that was ripe for transformation, and I was brought in to guide that transformation”.

“I found a business that had been around for 20 years and was very strong,” he says. “It has been, and I believe will continue to be, the leading channel for personal lines in the UK.”

McMillan says that “for various reasons” Esure had been “somewhat underinvested in, particularly in terms of technology and people capacity.

“So, we made it a priority to invest in the company, and we’ve been doing so over the last three or four years.”

Digital transformation

Esure’s digital transformation looked to revitalise how the provider offered policies, create new systems and a new portal to deal with claims, support customers and sell policies.

McMillan says that after he began his work, he identified “over 200 pain points” in both the way that the firm did business and in the market generally. 

“We conducted extensive customer research and engaged in conversations with our staff, who were extremely frustrated with our lack of flexibility and inability to respond to a fast-moving market and customer needs.

“To address this, we established multidisciplinary agile squads, bringing together people from the front end of the business who understood customer needs, along with tech and data partners.

“At one point, we had about 50 agile squads working on different aspects of design and development.”

The development of this transformation wasn’t without its roadblocks, namely: Covid-19.

McMillan says while it would be hard to put a figure on how much the pandemic set the transformation back budget-wise, Covid-19 stalled progress on the project for “months, even quarters at a time”. 

“Implementing a major transformation program during the peak of Covid was certainly challenging,” he says.

The war in Ukraine also had an impact on the progress of the project, with McMillan saying Esure was working with a firm that had “a significant portion of its tech delivery” based in Ukraine.

He says: “As the situation there escalated, we found ourselves with team members in our squads from Belarus, Russia, and Ukraine, which required careful navigation.”

Although the firm touted completion of the project in February, confirming alongside its full year 2023 results that it was just a case of bringing any renewals to the new digital platform, McMillan says that “I don‘t think we’ll ever be 100% complete.”

He adds: “Strategy is about constant evolution, listening to customers, and continuously developing propositions.

“So, while we’ll never be truly finished, we’ve reached a major milestone. We‘ve built the platform’s foundation, transitioned all customers to the new platform, and decommissioned the old one.

“These are significant achievements – milestones that many businesses never reach.”

Tech trouble

While Esure has now successfully migrated its policies onto its new platform, the insurer has faced several issues on the technical side this year.  

In March, the firm was temporarily unable to offer renewals to a segment of its customers; following that, it offered six months of free home insurance to "a small number of customers" following a "technical error" with its renewals. 

The insurer was then called out on The One Show’s ‘Watchdog’ segment, which highlighted the cases of two claimants, Sherise and Carla, who had both faced difficulty getting in touch with Esure to progress their claims, with Sherise’s claim being lost entirely.

The insurer also temporarily suspended its ability to offer home and motor quotes directly from it’s website, while the last additions of it’s digital transformation were finalised. 

At the time of the outage, Esure’s chief financial officer Peter Bole told Post that restoring direct functionality was a “matter of priorities”.

Direct motor capability was restored in May, and McMillan confirms that home is now fully operational too.

When asked how these issues came about, McMillan says “we don’t always get things right” and that customer service is always going to be “our top priority”.

He says: “We’re a very customer-centric business with a customer-centric culture, and we’ve made great progress over the last couple of years.

“Companies don’t always get things right and won’t in the future, but what we have is a massive commitment to continuous improvement.

“We’ve got a lot of feedback coming directly from customers, and we continue to respond and try and make things better.”

When asked if he could now draw a line under the firm’s technology issues, McMillan says the firm plans to “evolve and improve” its customer service and proposition constantly, and that he “wouldn’t want to draw lines under anything”.

“We’re going to continue to be responsive and humble about what we deliver for customers,” he says.

In terms of benefits that customers will see from this transformation, McMillan says: “I would say that they already see a lot of it – 84% of our Esure Flex customers are using the portal now. That’s massively up on our historic online offering – 50% of policy changes have been made digitally. Customer feedback has been strong too, with 90% of customers scoring for four or five out of five for customer ease. It’s been a massive shift for us.

“We now have 50% of service contact done through chat, which is responding to what customers want. I talk a lot internally about us not being a digital-only company, but a digital-first company.”

Following the £29.1m loss the insurer posted in 2022, McMillan said at the time that the digital transformation had “clearly impacted profitability” but that the firm “will probably see the benefits more in 2024”.

Esure went on to suffer a £89m loss in 2023, but McMillan’s prediction of a prosperous 2024 may not be far from the mark.

The firm released its results for the first half of 2024 in August, with the update revealing it had increased turnover and restored “strong profitability” for the first half of 2024.

The provider did, however, also reveal a 12.8% and 12.2% decrease in its in-force policies for home and motor, respectively; seeing its total in-force polices decrease from 2.25m in the first half of 2023 to 1.9m for the first half of 2024.

Esure experienced a similar drop-off in 2023, with its in-force policies decreasing to 2.07m from 2.32m in 2022.

When asked what Esure’s strategy for gaining back this lost business, McMillan says the firm is “focused on keeping the customers we’ve got” and “steadily building out the new propositions, and steadily increasing our share of the segments we’re in”.

After Esure’s last two sets of full year results, McMillan previously told Post that the firm will “without a shadow of a doubt” have "very, very strong profitability this year”, and that expectation has not changed.

Asked directly if he expects to turn the tide and report a profitable year for 2024, he says: “Yes. We’ve had a very strong first half.”

Growth plans

Returning to Esure’s transformation, McMillan says it was initially implemented to position the firm for growth, which he adds is now the company’s focus, with two particular strategies in mind.

He says: “Firstly, it’s continuing to develop and improve the customer experience. Secondly, it’s about broadening propositions, and both of those leading to steady, profitable growth.”

McMillan says this will come not in the form of new products or lines, but doubling down and expanding on Esure’s core markets, home and motor.

He says: “We’ve got quite a large home business, over 500,000 customers, but there isn’t a massive cross-holding between our home and our motor customers.

“There’s an ability for us to grow home into our motor customer base, that’s a path that others have certainly followed.

“Something like 50% of the homes in the UK are multi-car homes, our multi-car penetration, is relatively low, so these are propositional ways we can grow.”

McMillan confirmed as well as an upcoming “soft launch” on a multi-product policy “that will continue to evolve during the year”, Esure has also been busy developing an app that will be released “in the next three to six months”.

Following that, McMillan confirmed despite Sheila’s Wheels being a “very well-loved and well-known brand” there is “nothing to communicate at this stage” in terms of any sort of evolution or fresh push of the brand. 

He does, however, state it’s something that “may well happen” in the next year or so; as well as saying that while the now 16-year-old classic television adverts, featuring three women clad in pink sequinned dresses singing from the seats of a bubblegum pink convertible, were “wonderful at the time” they’re probably “a bit outdated”.

On top of having no immediate plans for Sheila’s Wheels, McMillan says Esure also plans to focus on organic growth, with mergers and acquisitions “not a focus” for the firm.

He says: “The instructions I’ve got from my board are to take advantage of the investment we’ve just had to continue to build and develop the company.”

Pricing and AI

Key to the continuous development of any insurer is its approach towards pricing, which Esure has approached “cautiously” in recent years, according to McMillan.

He says: “Claims inflation hit the market like a runaway freight train in late 2022, I think we saw it pretty early. We started to price up. We’re not frightened of shedding volume in order to protect profitability. 

“We’re going to continue to be cautious on pricing, we’ve seen some moderation in inflation recently, but it’s still there.”

McMillan points out this caution has been key to the firm’s investment strategy, having freed up capital to develop its data science and artificial intelligence capacities.

“We have a very data-literate workforce and a strong pricing capability,” he says.

“We’ve been using AI in our pricing for about five years, most of our pricing models run on some form of AI. We set up a machine learning operations team, which decouples our algorithms and allows us to use open-source ones from around the globe and innovate.”

McMillan states Esure is currently developing six different use cases for generative AI, which he says are “already bringing benefits in terms of the quality of customer conversations”.

He cites the ongoing march of technology as the largest shift he’s witnessed in the market during his career, saying: “The traditional artisan underwriter, who relied heavily on hunch and experience, now typically operates with the support of extensive analytics and data science, even in more complex areas like commercial property and liability.”

Customer expectations

On the topic of shifts, McMillan also highlights the changing nature of customer expectations as a challenge and opportunity for his business. 

He says: “In the past, insurers might have focused on what competitors like RSA, Axa, or Aviva were doing.

“Now, customer expectations are increasingly shaped by their experiences with companies like Amazon, Netflix, and Uber.”

Looking to the future, McMillan says he is determined to meet those expectations, saying the years ahead hold a “great, great opportunity” for the firm. He says: “I think we’ve got one of the best platforms in the market, and I mean that both in terms of the technology, but also people and culture.  

“There’s an opportunity for us to grow and over time, to be the real standout in terms of customer service in the market.”

Whatever this year and the years beyond may hold for Esure, the industry will surely be watching closely as McMillan focusses on returning the firm to profitability, enhancing customer service, and developing products and services.