IAG boss defends profits
New Zealand’s largest general insurer is defending its leap in profits and is not promising to stop raising premiums.
IAG New Zealand chief executive Jacki Johnson said future premium prices rises were dependent on what international reinsurers charged IAG and weather events. ‘‘I’m not avoiding your question; it’s just that you can’t give guarantees if you can’t predict the weather and all the natural events.’’
IAG NZ profits were returning to pre-earthquake levels but some parts of the business were not producing acceptable profits and home insurance was one.
‘‘We are getting back to what is normal profit that we need out of an insurance business with the capital requirements for this market. We are just restoring to where we were pre-earthquake, ’’ Johnson said.
IAG NZ insures homes, contents, vehicles and vehicle breakdowns and travel risks and forms about 20 per cent of the wider Australasian insurance group.
The New Zealand business was not as profitable as other parts of the Australasian group.
Last week IAG posted a $92m ‘‘insurance profit’’ for the half year, 77 per cent higher than the first half in 2012.
IAG NZ’s reinsurance costs were higher than other parts of the group, 15.8 per cent of premium revenue, she said.
Reinsurers had been recalculating the risk of this region.‘‘What we have been most worried about is if they pull out.’’
But over last year IAG had seen customers in New Zealand stick with insurance despite the rises and reinsurers were sticking with the market.
Johnson said IAG was mindful of the affordability of insurance but had to price correctly for the risks it faced in New Zealand.
IAG has settled only 50 per cent of Canterbury residential earthquake claims more than three years after the quake.
Johnson said Canterbury was her priority and the IAG earthquake recovery team was ‘‘as energised as they have ever been’’.
Hiring more staff was not necessarily the way to speed up settlements because several other factors were slowing down the process.
For instance the aftershocks had continued for two years and IAG could not build on damaged land until it was remediated. It was also waiting on information about the Port Hills, TC3 land and flood plain issues.
The management of repairs and rebuilds of shared-wall properties with multiple insurers was now making progress.
If IAG built a house on TC3 land and it was at the wrong level after new flood plain information came out a customer could be in a worse position, she said.
A lot of work was going on behind the scenes on these issues and she chaired a fortnightly meeting of government officials and the industry on it.
Another holdup was customers not making decisions as quickly as IAG would like on rebuilding new homes. IAG had a team to help customers make these decisions.
IAG had a lot of pressure two years ago from overseas investors in IAG to settle claims quickly with cash. That would have left customers ‘‘grappling’’ with a complex system of the Earthquake Commission and insurers, hiring their own tradesmen and dealing with all the land issues.
Johnson was in Christchurch a lot ‘‘and I do feel for people who have had to wait’’.
If the rebuild went as well as IAG hoped Christchurch would be the most insurable city in the world.
- © Fairfax NZ News
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