IAG New Zealand’s Chief Executive says while all insurers have started to signal risk through insurance premiums, she doesn’t want to pull the lever “too hard” when it comes to risk-based pricing.
The country’s largest general insurer reported its annual financial results on Wednesday, showing IAG NZ made NZ$4.12 billion from its Gross Written Premium (GWP) – the total amount of money customers are required to pay for insurance coverage on policies issued by an insurer – in the 2024 June-year.
It’s a 15% increase from IAG NZ’s annual financial results in 2023, when IAG NZ’s annual GWP grew by 12% to NZ$3.58 billion.
“We're all starting to signal risk through premiums. So that risk based pricing that we've talked about before, what I don't want to do is pull the lever too hard,” Whiting told interest.co.nz.
“I think it's really important that we don't leave communities stranded, because we know that many of the communities that live in high risk environments are the most vulnerable. So I'm really very careful around how much we get into risk based pricing.”
She said the insurer expects to start seeing “some stablising” in premiums – but that stabilisation is going to be more in line with the inflation rate.
IAG NZ revealed an insurance profit of NZ$500.7 million for the June-2024 year.
That's NZ$452.5 million higher than the NZ$48.2 million insurance profit the insurer reported in its 2023 annual results, which were affected by the North Island’s severe weather events.
The IAG group reported a net profit after tax of A$898 million (NZ$984 million) to the Australian Stock Exchange.
IAG’s board declared a full-year dividend of 27 Australian cents per share, up from 15 cents per share in the 2023 financial year. It’s an 80% increase from a year ago.
'Sustainable'
Whiting described IAG NZ’s full-year results to interest.co.nz as “sustainable”.
“Our role as the largest general insurer and the fact that we cover over a trillion dollars worth of assets is actually about making sure that we’re here for customers when they need us. And so that could be tomorrow,” she said.
“And, you know, the results just demonstrate the sustainable outcome. There's a bit of volatility, as we know, because of weather events. But, yeah, I'm comfortable that we are going to be here for the customers.”
The insurance giant is Australia as well as NZ’s largest insurer and includes the AMI, State and NZI brands here.
The insurer received 552,000 claims and paid out NZ$2.8 billion during that 2024 financial period.
It also closed approximately 97% of the more than 50,000 claims it had received from the Cyclone Gabrielle and the North Island floods that happened in early 2023.
IAG NZ now has around two million customers according to Whiting, and protects one in two households in NZ.
Balancing out
Whiting wrote in IAG NZ’s 2024 results that insurers needed to take a “multi-year view” of their financial performance given NZ’s susceptibility to natural hazards and their volatility.
“Within the insurance cycle, we need to balance out the bad years with the good,” she said.
Interest.co.nz asked Whiting on Wednesday if she would describe it as a good year for IAG customers as well as the insurer.
Whiting replied that IAG NZ’s customers had been experiencing “pretty big” cost of living challenges.
“We’ve tried all we can to support them. So we’ve bolstered our customer care team, we’ve looked at how we might help people with their premiums by reducing options, et cetera, looking at different ways of structuring their insurance,” she said.
“No one wants to pay a premium and worry about whether their insurer is going to be there for them.”
Margin surges
IAG NZ’s insurance margin for the 2024 financial year jumped to 22.5%, up from 2.4% in 2023. The insurer said in its results that the increase reflected a higher underlying margin of 16.9% (up from 13.5% in 2023) as well as “significantly lower” natural perils.
Is inflation or the risk of future natural hazards more of a threat to the insurer’s freshly padded out margins?
“Inflation seems to be tapering off, as we've all seen, so less of a worry currently. I think it's more than natural hazards risk, and what we do with that – we’re doing a lot of mapping, trying to understand where those risks are,” Whiting said.
IAG NZ’s reinsurance bill has climbed 61% over the past three years due to the increase in NZ’s natural hazard risks.
“... reinsurers look at us exactly the same as we look at customers – what is the risk we're taking here? And [reinsurers] were seeing New Zealand as being a pretty risky country and so the premiums they were charging us were aligned to that,” Whiting said.
“We've renewed our reinsurance so we know what it's looking like. And that's why I'm pretty confident we're not going to see anything near the level of increases we did last year.”
The IAG group announced in July it has set out a natural hazard allowance of A$1.28 billion (NZ$1.4 billion) in the 2025 financial year, which is 17% higher than a year earlier.
“It’s still the second riskiest country in the world, so [reinsurers] still see it as risky,” Whiting said. “The thing that we can do as a country, though, is to focus in on reducing those risks.”
She added that she’d like to see the Government “speed up” its efforts around climate adaptation.
“I think reinsurers are a bit more comfortable with where we're at the moment. But if we have another big event, that is certainly going to trigger a change,” she said.
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6 Comments
Well that explains why my insurance has gone up 20% this year yet again.
Consumer NZ reckons to shop around.
Well done that and there is nothing cheaper.
might have something to do with the fact that IAG is a monopoly that owns something like 80% of the market.
how this was allowed is beyond me.
starting to think we are in an oligarchy in this country as the last 2 decades have seen so many monopolies and duopolies created, insurance, banking, supermarkets etc etc.
“We're all starting to signal risk through premiums. So that risk based pricing that we've talked about before, what I don't want to do is pull the lever too hard,” Whiting told interest.co.nz. “I think it's really important that we don't leave communities stranded, because we know that many of the communities that live in high risk environments are the most vulnerable. So I'm really very careful around how much we get into risk based pricing.”
The problem is that if they don't see a risk realised in anyone year, they rake of the income from premiums they didn't have to pay out as profits to pay shareholders. What they should be made to do is hold all those as a fund that grows to cover those costs when the risk is realised. when they do this, their reliance on reinsurance reduces.
But I also stated this in the stream for the other article on IAGs profit in reference to price deflation; "We don't see deflation because companies use a practice of charging "what the market will bear". This mostly bears no relationship to the cost of producing the product or service other than it is invariably more than that cost. If the market is used to a particular pricing level, then that is what will be charged, or more. And once profit margins are established they will try to be maintained. The ONLY time prices will fall is when sales stop."
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