IAG’s intermediated progress: rate increases lead the way
IAG’s intermediated progress: rate increases lead the way | Insurance Business Australia
Insurance News
IAG’s intermediated progress: rate increases lead the way
$250 million profit is the immediate target
Insurance News
By
Daniel Wood
Like CEO Nick Hawkins, the leader of Insurance Australia Group’s (IAG) intermediated business, Jarrod Hill (pictured above), said increasing the cost of premiums was a major reason for his division’s current profitability.
“As we move into FY24, top line growth will continue to be largely rate driven,” said the group executive of Intermediated Insurance Australia.
Hill referred to “multiple pricing increases” across his business this year and an ongoing “adjustment” of rates in response to cost pressures, many of those inflation driven.
The message may have pleased investors at this IAG Investor Day. However, one major current challenge for brokers is their customers’ rising premiums. News that a giant insurer’s ongoing profitability depends on “multiple pricing increases” will come as no surprise, but carrying this message to customers at renewals time is no easy task.
“Our ability to deploy rate at pace continues to improve,” said Hill.
IAG’s intermediated business expects to bring in $250 million in profits next year which Hawkins, in the opening presentation, attributed to “significant actions around pricing and portfolio management.”
“I want to be clear,” said Hill. “The focus today has been on simplifying our business and building that foundational risk acceptance, underwriting and pricing skills that are critical in any consistently high performing intermediated business.”
CGU’s broker portal
Hill talked about features that have been added to the firm’s CGU broker portal, including fully digital lodgement and allocation.
“We expect to see benefits ramp up through FY24 as utilization increases,” he said.
Hill said “expense” remains an ongoing challenge – however, he said the firm is “driving improvement” through “discipline controls.”
“In a high inflationary environment this year, we’ll reduce our direct administration costs by $9 million over five years,” he said.
$250 million profit as a “ticket to play”
The slide in retention rates to a few percentages below the target of 85%, said Hill, was good news.
“Our analysis shows however, we’re retaining the business that we want to keep,” he said. “We are comfortable focusing on achieving adequate rate at the expense of retention while it doesn’t negatively impact the portfolio mix.”
The figure of $250 million profit, said Hill, is “our primary focus” and “our ticket to play before we can grow the business.”
Beyond next year’s profit target, Hill mentioned future plans – called “horizons two and three” – to establish CGU as a “market leader in the broker space.”
He said once a more competitive cost base, together with enhanced core insurance capabilities, are “embedded in the business, we will then turn our attention to growth.”
Intermediated future: a modern end to end platform solution
“Our business is moving towards a modern end to end platform solution that will enable a leading core insurance capability,” he said.
Hill said his division has studied best practice in the broker space across North America, Asia and Europe, together with learnings from IAG’s direct business.
He suggested one key to intermediated success was finding a balance between the cost of investments updating “long dated technology” and achieving benefits. Hill said these investments were delivering “strategic capability” while “keeping in mind maximizing speed to value.”
Hill said an example of this approach is IAG’s aim to improve underwriting capability with what he described as “a tailored underwriting workbench with embedded rules and controls.”
“This provides a platform for CGU to offer more dynamic service and product proposition within a much stronger control environment,” he said.
Friction-free pathways for brokers
Hill gave further examples of how his business is supporting “more efficient operations across the business” including through reduced manual interventions to lower operating costs and create “frictionless engagement pathways” for brokers.
He expected “straight through processing” to increase, particularly for CGU’s high volume “commoditized business.”
“I see the building blocks are in place that ensure the business is set up to achieve the $250 [million] insurance profit next year and our medium to longer term strategic goals,” said Hill.
Are you an insurance broker? How do you see the progress of big insurers in the intermediated space? Please tell us below
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