Insurer IAG signals double-digit percentage premium increase as 'natural perils' mount

Monday, 13 February 2023

Aucklanders are weary after two weeks of flooding.

Insurer IAG has told investors on the ASX sharemarket that it is forecasting a double-digit percentage increase in the premiums it collects from households and businesses in New Zealand and Australia.

IAG, which owns the State, AMI and NZI brands in New Zealand, posted a 170% rise in its after-tax profit for the first half of its financial year.

Its after-tax profit went from A$173 million (NZ$190m) in the last six months of 2021 to A$468m in the last six months of 2022.

House, contents and car claims following flooding in late January in Auckland would cut IAG’s insurance margins, however, investors were told.

* Largest insurer expects to pay $383 million in flood claims

Landslides and debris from the storm has blocked roads and damaged homes in Auckland’s Titirangi.

* Insurance premium worry: flood may see NZ's biggest insurer blow its budget for 'natural perils'

But the insurer said it was “actively” increasing premiums in response to the rising cost of settling claims, including in anticipation of more, and costlier natural disasters.

Premiums rises would be higher than it had previously forecast with IAG expecting overall premium growth to be around 10% in its current financial year, which runs ends on June 30.

It had previously forecast premium mid to high-single digit premium growth.

Premium rises would not fall evenly across policyholders, with some seeing their premiums rising by more than others.

The Quashed insurance comparison service revealed last week that despite shopping around for their house insurance, homeowners have been paying an average of 17% more for their cover this year compared to last.

Despite the rising costs of insurance for households, IAG chief executive Nick Hawkins said policyholders were sticking with their insurance.

“What’s encouraging is the high customer retention rates we continue to hold across our brands, reflecting the trust and value our customers place in our products and services,” he said.

The last six months of 2022 saw IAG pay out A$70m more in claims after natural disasters and extreme weather events than it had forecast.

The Nelson floods in August last year cost it A$19m, and the storm that hit the East Coast in July last year cost it $68m.