CGU’S RIGHT COVER MEANS NO MORE RISKY BUSINESS
It’s hard work to keep a small business running. Yet four in five Australian businesses risk closing DOWN because they don’t have adequate insurance.
CGU’s research shows four out of five Australian businesses are underinsured, on average by as much as 38%.
That’s why CGU has developed Right Cover, an innovative, simple and cost effective service designed to ensure small businesses get the right level of insurance.
As part of Right Cover, a loss adjuster will review a small business owner’s assets, trading profits and insurance requirements and produce a comprehensive report, including insurance recommendations.
When the business owner accepts and implements these recommendations, CGU will increase their insurance policy limit by a further 20% above the recommended levels, at no additional cost.
And while the price of the service, which has been developed to be affordable for small and medium enterprises, is only paid once, these benefits continue to apply to business insurance policies for an agreed period, as CGU will automatically index the sums insured by the consumer price index.
Having the right level of insurance can make all the difference when risk becomes reality.
Right Cover is just one of the ways CGU is developing innovative products and services to differentiate our business and provide superior customer experiences.
Intermediated Insurance
| Financial performance |
2008 |
2007 |
| Gross written premium |
$2,553m |
$2,600m |
| Net earned premium |
$2,363m |
$2,338m |
| Insurance profit |
$174m |
$220m |
| Insurance margin |
7.4% |
9.4% |
Major events in 2008
- Challenging conditions as the soft commercial insurance cycle continued.
- CGU remained committed to disciplined pricing.
- Some market share ceded, but underlying insurance margins beginning to improve.
Operational review
Our Australian intermediated insurance division, known as CGU, was restructured in April 2008 to integrate IAG’s former commercial insurance and business partnerships businesses. The division now includes all insurance sold through intermediaries, including brokers, authorised representatives, financial institutions and motor dealers, predominantly under the CGU and Swann Insurance brands.
CGU’s GWP declined by 1.8% compared to the previous year, reflecting our commitment to maintaining disciplined pricing. Targeted rate increases have resulted in a loss of some business, however, we believe we have a responsibility to continue to price insurance at sustainable levels rather than underpricing those risks.
Winning new business in this environment was very difficult, but CGU’s ongoing focus on customer relationships has supported retention rates, which remained steady at around 80%.
Profitability continued to be supported by prior years’ claims reserve releases, although at lower levels than last year. Our insurance margin reduced by 2.0% for the year, reflecting declining GWP, lower reserve releases and widening credit spreads.
However, the underlying performance is beginning to improve through a focus on profit rather than growth, strict control of expenses and productivity improvements. We also continued to introduce initiatives to differentiate CGU through innovative products and services, such as Right Cover (see case study).
Outlook for 2009
GWP growth is expected to remain flat for the coming year as we focus on restoring profitability rather than pursuing unprofitable market share.
The underlying insurance margin is expected to improve as we realise the benefits of targeted rate increases and efficiency initiatives, which will help us deliver a portion of the Group’s $130 million annual savings (before tax).
