The insurer’s chief executive believes that technology and data science is the key to winning insurance’s ’game of small inches’
Esure has swung back to profit as boss David McMillan said the fast-improving insurer can ‘leapfrog’ rivals.
Pre-tax profits grew last year to £34.2m (2019: £3.3m). Trading profit rose to £82.2m (2019: £57.7m).
The underwriting loss was cut from 106.3% to 104.4%, which would have improved further but for esure growing its expense ratio to 31.6% (2019: 26.1%) amid investment.
Now, with backing from private equity giant Bain Capital, chief executive McMillan said the esure team mission is to become the pre-eminent digital insurer in the UK.
Esure can ”out innovate” and “out pace” the competition, in a market which has suffered ”a fair erosion of trust from customers”, McMillan said.
He added that insurance was a ”game of small inches” and that data science would be crucial in winning this game across pricing, claims or the customer journey.
”We believe there is an opportunity to leapfrog the market on technology. We think a lot of [the] sector is sitting on technology - not fully cloud enabled and cumbersome to change. There is an opportunity for us to leap a generation,” he told Insurance Times.
Esure in 2020 at a glance
| 2020 | 2019 | |
|---|---|---|
| In-force policies (millions) | 2.453 | 2.380 |
| Combined ratio | 104.4% | 106.3% |
| Net loss | 72.8% | 80.2% |
| Net expense | 31.6% | 26.1% |
| Solvency coverage | 169% | 149% |
Motor and home results
Motor gross written premiums (GWP) were flat at £737.1m. Growth in policies was offset by lower prices.
Reported net loss in motor improved to 72.6% (2019: 82.2%). Net loss was boosted by 5.8% reserve releases.
McMillan said the firm’s Brilliant Basics campaign on underwriting and claims had helped improved the net loss, along with lower frequency amid the Covid-19 lockdown. This was offset to some degree by high claims severity.
McMillan said he wanted esure to ”reserve prudently up front and have expectation that reserves release over time”.
Home GWP grew to £103.9m (2019: £98.1m), but underwriting was challenging, with losses growing to £21.3m (2019: £8.2m) due to several weather events, more subsidence during a dry spring and the costs of increased investment.
FCA pricing study and lockdown
Esure is one of the top five players on price comparison websites (PCWs), with between 80% to 90% of customers arriving through aggregators.
The FCA pricing crackdown has raised fears that aggregators would suffer as less customers are now incentivised to renew if old and new policy pricing is flattened out.
But McMillan was confident in esure’s future.
”The four main [PCWs] are very well run and very successful companies,” he said.
”I think what has been quite remarkable about these companies is that they have not stood still. They have continued to innovate and change. My expectation [is] that they will continue to innovate and change and evolve and we will be with them as they innovate and change.”
In his first year as chief executive, McMillan noted that esure has a ”great, caring culture”, which has helped during the lockdown. Customer net promoter scores rose 2% to 52% over the last year.
”Our front line staff have been the stars of the show this year. We have had really high levels of customer service, despite the Covid disruption.”
McMillan said going forward, esure has assembled a top team to take on the market.
New faces include former RSA chief executive Andy Haste and independent non-executive Elke Reichart.
They join new leadership in technology and commercial, with Andy Burton and Justin Cockerill.
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