McMillan has been given a golden opportunity at esure - although there is much work to do
Briefing by content director Saxon East
The search is finally over and it’s ex-Aviva UK general insurance boss David McMillan who has landed the top role at esure.
McMillan is ambitious – he always wanted to run his own company, and now that wish has come true.
The jump from QBE chief operating officer to leading esure makes perfect sense as a career move.
He’ll certainly have to roll his sleeves up at esure, which has been through a difficult period.
What will he have to do to fix the business?
Volume vanity, profits sanity
Esure has been through a difficult period, having posted ‘disappointing’ results and having its solvency deteriorate after burning through £120m in capital, although that has been repaired following a new reinsurance deal.
There had been suspicion for some time among analysts that esure was too aggressive in acquiring customers, and paid the price with its 2018 results.
Outsiders believe McMillan must enforce a much sharper focus on underwriting and pricing, especially in these difficult times.
AXA is the latest insurer to trim its claims operations in a change sweeping the UK’s insurers
The market is running 2% rate increases with claims inflation somewhere between 3% and 5%, driven largely by increased costs in repairing vehicles.
As a private company, away from the relentless pressure of the City’s instant-profit demands, McMillan can now hit the brakes on premium growth and spend a sustained period on achieving greater underwriting profits.
Throughout his career, McMillan has shown he can do this.
For example, his period as UK general insurance chief saw continued underwriting profits, and he even severed the unprofitable relationship with Broker Network.
Another very important piece of the puzzle will be ensuring esure becomes a truly digital insurer.
Esure’s whole claims process is likely to come under scrutiny.
There will be less paper and more electronic processes, and likely less frontline staff on claims and customer service.
Indeed, a number of rival insurers have already taken those decisions.
Bain Capital will give him the money to invest in anything he requires - artificial intelligence, improved pricing systems, better fraud technology and automation processes.
McMillan has spent some of his career as group transformation director at Aviva, along with nearly two years heading QBE’s operations, so he has the experience to carry out this process.
Golden opportunity for McMillan
Elsewhere, esure has been quite conservative in its investment strategy – making little money from this area of the business.
Interest rates are low, but there is surely scope for esure to take on some greater risk on the investment portfolio.
McMillan has lots of good qualities and as a privately-owned company, he’ll have time to implement his battleplan.
That means he can take a long-term view, and embrace a Direct Line customer-focused approach.
Direct Line has been very smart in some of its customer initiatives – for example, guaranteed hire car and protection of no-claims discount on no-fault damages to customers.
It’s won loyalty from customers through service.
Too many insurers and personal lines brokers end up the same: in a price-driven race-to-the-bottom with undifferentiated products and service.
With the full backing of its wealthy investors Bain Capital, and time on his hands, McMillan has a golden chance to be different.
The opportunity mustn’t be squandered.
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