IAG New Zealand picked up $2 billion from gross written premium after almost 19% growth in the first six months of its 2024 financial year, but its Chief Executive says the company isn’t seeing any indications of its customer base being unable to afford premium increases.
IAG NZ is the country’s biggest general insurer and trades under its AMI, State, NZI, NAC, Lumley and Lantern brands. Gross written premium is the total amount of money customers are required to pay for insurance coverage on policies issued by an insurer.
On Friday, IAG NZ reported an 18.8% gross written premium jump to NZ$2.015 billion in the six months to December 31 2023, up from NZ$1.696 billion a year earlier.
CEO Amanda Whiting says the gross written premium surge is “unusual” and is the highest rates the insurer has seen in the last decade.
“That is a pretty significant number, driven of course by a lot of inputs,” she says.
“The biggest one being reinsurance and what we have to put aside for natural perils and then the inflationary pressures that we're seeing in repairing both motors and homes.”
Reinsurance costs for the Aussie and NZ insurer in the first half of the 2024 financial period was up by 23% or A$135m, with a total of A$728 million in reinsurance costs for the whole 2024 financial year.
Whiting isn’t expecting the same gross written premium growth in IAG NZ’s second half of the 2024 financial year.
“Where we can, we are looking to ensure that we're not passing through too much rate increases to customers. But you'll start to see more risk signaling,” she says.
“So you will start to see people who are in high risk areas probably see higher increases. Again, because we know that consumers who are in low risk areas certainly don't want to be paying for consumers that are in high risk areas. And that is a balancing act.”
On top of that gross written premium jump, IAG NZ also reported an insurance margin of 20.8%, up from the 15.2% insurance margin in the first financial half of the 2023 year.
Asked how the insurer managed to increase its margin off the back of last year’s massive weather events, inflationary pressures and high reinsurance costs, Whiting says IAG NZ “need to be here into the future”.
“When you see price increases like that and margins like that, it's about being a sustainable organization and ensuring that we're here for the long term,” she says.
Keep the pedal down
IAG NZ reported an insurance profit of A$204 million in the first half of the 2024 financial year, up from A$136 million in the previous corresponding period – an A$68 million increase.
Whiting says reinsurance costs were slightly lower this calendar year which helped take “a bit of pressure off” but IAG NZ was still working internally on ways to reduce costs.
“We're doing a lot of work at the moment around transforming our business and what we want to do is be much more efficient and have a lower administration cost and therefore need to charge our customer less.”
Whiting also says that the insurer has seen some “slight tempering” in inflation but was quick to insist that that they weren’t out of the woods yet.
“But when we start to see that, we're looking to see whether we can look at our premium calculations,” she says.
She agrees that banks and insurers are having to work together more closely, describing it as “imperative to our economy” that the two work together.
“We provide the foundation and we're there to ensure that banks have a backup plan should something go wrong in centered perils. But we're only on risk for one year and banks are on risk when you can get it on a mortgage for a lot longer,” Whiting says.
“So us working together has become more and more important as we're seeing more of these events that are more catastrophic.”
The increase of severe weather events isn’t just an issue that Whiting describes as IAG NZ’s “biggest priority”, it’s also a conversation that the insurer is trying to have with central and local government as well as other industries following last year’s Auckland Floods and Cyclone Gabrielle.
“We're pushing pretty hard. We're talking to everyone who listens and even some who won’t to make sure that we are keeping it top of mind because we've got an opportunity here,” she says.
“I think what we need to do is keep the pedal down and make sure that we are continuing the conversations, because the risk is that we forget. We all move on and we forget. And I know for the people who are in those communities, there's certainly not any point where they can forget.”
20 Comments
As far as I'm aware there are only two other retail insurance companies in NZ. AA and FMG. Any other eg bank insurers, are just a variation on a theme from a higher level insurer such as Vero. I think even AA is tied in with Vero. If AIG push up premiums so will the others within a few months.
There's a big element of fear attached to insurance uptake, and a great deal of fear in general being promoted to society, so it goes without saying.
One interesting observation I've had over the years is that an insurance salesperson will make their pitch something like "what would your family do if you died of a horrible disease", but will usually flat out refuse to tell you the odds of you getting taken out by said disease (which they definitely know, it's how they calculate premiums). It's an emotive based pitch rather than one based on statistical likelihood.
Only have to look at the government reaction in the last 15 years to see they don't support that thinking at all. Instead of having a discussion it is now assumed that you are covered immediately after insurance by both local and central government. Evidence? ... Gabrielle.
The assumption is managed retreat will be paid for by those not affected.
No, that was an outright lie pushed by a rather large MP. The only "cover" they got was exactly the same as every other owner who was redzoned owner. Brownlee wanted to confiscate their property with no compo to punish them for not insuring.
And although AMI customers got bailed out the other customers of the other small insurance co that went under did not.
I had all my business insurance through NZI. We have been with them for 10 years. 1 claim in that time, a vehicle theft.
We are no longer with nzi for any business insurance. They just whacked 10% on last years numbers, we are now with ando, 4k less than what nzi cost us last year 7k less than what nzi wanted this year.
Not surprising they are rolling in cash. Thieves.
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