SUMMARY OF PERFORMANCE
AUSTRALIAN OPERATIONS
David Issa CEO, Personal Insurance
Our largest portfolios – motor, CTP and home insurance – maintained their leading market positions in Australia, despite facing challenging conditions during the year.
PERSONAL INSURANCE
Australian Personal Insurance recorded a solid result despite operating in one of the most challenging environments in the past few years.
Customer renewal in our direct personal lines portfolios remained high at about 90% during the year, and customer satisfaction remained at about 80%.
A key challenge during the 2006 financial year was sparked by the public debate in NSW between NRMA Insurance and some smash repairers about our motor repair allocation model. This debate created uncertainty for some customers.
Throughout this period, we engaged in ongoing consultation with the smash repair industry to achieve a resolution. Together with the rest of the industry, we were an active participant in the development of a voluntary code of practice governing the relationship between insurers and smash repairers nationally.
Through ongoing dialogue, we believe we are well on track to rebuilding a sustainable, long-term relationship with the smash repair industry to benefit our customers.
The most significant claims event of the year occurred on 20 March 2006, as Cyclone Larry tore through North Queensland, destroying or damaging homes, property and cars in its path.
Within 24 hours, our team arrived in the worst hit areas, processing claims and arranging temporary accommodation for customers whose homes had been severely damaged.
Once the initial emergency passed, we hosted a Help Expo that brought together builders, architects, building materials companies and other suppliers under the one roof. Nearly 800 customers attended the Expo, taking the opportunity to seek advice from service providers to help get their repairs underway as quickly as possible.
HELPING KIDS STAY SAFE ON THEIR WAY
TO SCHOOL
In 2003, Peta Dawe’s five year old daughter was returning home from school when she accidentally hopped off her school bus at the wrong stop, and was lost for more than two hours.
Peta, an NRMA Insurance country service centre Manager in the Hunter region of NSW, was frantic.
“As any parent could imagine, finding your child in a park near dinner time, lost for two hours while trying to find her way back home, was very upsetting,” Peta said.
“It made me think that students, especially younger children, need extra education around safety when they first start catching the school bus.”
So NRMA Insurance joined Peta in developing a bus safety program for kindergarten children that aimed to reduce the chance of accidents happening when travelling to and from school.
The program has today been undertaken in almost 20 communities across NSW, delivering important bus and road safety information to around 5,000 students.
“NRMA Insurance is in the business of paying claims when things go wrong, so it makes sense that we help reduce the chance of incidents happening in the first place.
“The bus safety program is a great example of the way we work with the community to help people lead safer lives,” Peta said.
Our many programs to reduce risk in the community continued during the year. We awarded more than $530,000 in grants to fund community projects that reduce risk in local areas. For example, the Epping Youth Development Group in Sydney was presented with a grant of $3,000 to engage young offenders in a job skills program which aims to decrease the incidence of localised juvenile crime.
In addition, for many years we have been proud supporters of NRMA CareFlight, an emergency medical helicopter transport service. As part of this support, we are contributing $11.2 million over three years to fund the Head Injury Retrieval Trial, which aims to reduce the severity of head injuries through the provision of rapid specialist medical assistance at the scene.
We were also involved in the development of the Lifetime Care & Support Scheme in NSW, which will ensure people severely injured in car accidents are looked after, no matter who is at fault.
HELPING OUT WHEN HOLIDAYS
TURN BAD
After a long drive in the sweltering summer heat, Barry and Margaret Wall settled into their caravan for the night, ready to take in the popular Tamworth Country Music Festival the next day.
But things took a nasty turn when Barry woke at 5am, having lost feeling down one side of his body. He was rushed to hospital where he was diagnosed as having had a mini-stroke.
“After Barry’s condition stabilised, he was cleared to go home, but not to drive,” Margaret said. “I had never towed the caravan before and was worried how I would get it home. In all honesty, I was tempted to just put it on the highway with a ‘for sale’ sign.”
Margaret rang the NRMA Insurance Helpline, a free 24-hour service for customers that provides emergency advice and assistance. NRMA Insurance arranged to tow the caravan more than 400 kilometres back to the Walls’ home.
Tony lacono, who manages caravan products at NRMA Insurance, said the Helpline is designed to assist people deal with stressful situations.
“Each year, thousands of Australians drive off on holidays but unfortunately things don’t always go to plan. And when people are away from home they can feel vulnerable and in need of assistance,” Tony said.
“It was fantastic help at a time when we both really needed it,” Margaret said.
OUR PEOPLE
The dedication of our people enables
us to move beyond the mechanics of
insurance to provide the kind of rapid,
comprehensive response experienced
by our customers in North Queensland
in the wake of Cyclone Larry.
This year, our staff turnover rate was higher than we would like, particularly in our call centres. To address this, we introduced a number of programs, including the continued roll out of staff consultative committees, which bring together people from operational and management areas to ensure the thoughts and ideas of our people are heard throughout the business.
We offer four educational qualifications in 15 business streams, through an association with a range of government bodies and accreditation authorities. Currently, more than 1,000 of our employees are students.
Safety and wellbeing at work continued to be a focus. During the year, the number of workplace injuries decreased, supported by our internal health and safety program, besafe. We also saw an increase in the number of employees participating in health and safety training.
LOOKING FORWARD
Our key priority for the year ahead is
to continue to improve our customers’
experience. We will do this by focusing on:
- developing our people by embedding the values and behaviours we expect of them and giving our leaders the training they need. We believe this will help improve employee engagement, which in turn will generate improved customer experiences;
- improving the consistency of our sales and service delivery and improving our marketing effort; and
- enhancing our claims delivery.
Jacki Johnson
CEO, Business Partnerships
The performance of our workers’ compensation business improved substantially during the year, and Swann Insurance won major new contracts.
BUSINESS PARTNERSHIPS
Our Business Partnerships division was formed in February 2006. It brought together businesses from across IAG that partner with government bodies and the private sector and has a clear focus on driving mutually beneficial results. The division encompasses:
- workers’ compensation businesses in NSW and Victoria, which administer policies and manage claims as an agent of the states’ WorkCover schemes;
- distribution partnerships, which provides insurance products to customers of more than 100 banks, credit unions and affinity organisations;
- Swann Insurance, which offers insurance and extended warranty products through car and motorcycle manufacturers and dealers, and consumer credit insurance through financial institutions; and
- self-insurance services and safety and risk management consulting businesses.
YEAR IN REVIEW
Our workers’ compensation business
substantially improved its performance
during the year. We successfully renewed
our licences in NSW and Victoria, but
exited the South Australian market.
Our Victorian business exceeded key performance targets, and achieved significant improvements in its satisfaction rankings from employers and injured workers compared to last year.
We worked hard to transform our NSW workers’ compensation business into a higher performing business. A new leadership team is in place and WorkCover has introduced a new remuneration model that provides greater certainty and focus on performance and results for employers and injured workers.
Our Swann Insurance business continued to perform well, winning major contracts with General Motors Holden and Honda Motorcycle & Power Equipment during the year. A new insurance sales software system was implemented, making it easier and more efficient for our partners to do business with us.
We are working hard to strengthen the profitability of our distribution partnerships business by investing in new technology and processes, and improving the engagement of our people.
RESEARCHING WAYS TO TREAT
COMMON INJURIES
Each year, there are more than 8,000 road collisions in the ACT, which result in around 800 injury compensation claims and cost the community more than $40 million.
Many of the injuries sustained in road collisions are minor or moderate musculoskeletal injuries, with whiplash associated disorders accounting for about 75% of these claims.
To help people return to their normal life after a car crash, NRMA Insurance has partnered with a range of organisations to research ways to improve health outcomes.
In the ACT, NRMA Insurance is involved with the ACE Study, a two-year research trial that assesses whether a more coordinated and timely approach to the treatment of crash victims – which encourages patients to follow a plan developed by a specialist medical provider – will lead to improved health outcomes.
NRMA Insurance’s Project Manager for the ACE Study, Susannah Littleton, said the current system provides the potential for excellent health outcomes. However, the study seeks to scientifically validate further improvement, which could later be used as a system for treatment of people with minor or moderate musculoskeletal injuries.
“The ACE Study has the potential to reduce the burden of injuries from car crashes – physically, emotionally and financially. It’s a clear example of how we can help our community and the business at the same time,” she said.
OUR PEOPLE
The Business Partnerships team helps
people get on with their lives after an
incident or injury – this is the promise we
make to our business partners and their
customers. For example, we were on the
ground providing emergency assistance
to customers within 24 hours of when
Cyclone Larry struck. To support our work
in this area, we received two Victorian
WorkCover Authority industry excellence
awards and a $20,000 bursary for
research into work-related stress; and we
will support injury management education
via postgraduate courses through the
Personal Injury Education Foundation.
LOOKING FORWARD
In NSW, competition will return to the
workers’ compensation market as the
freeze on shifting business between
agents lifted on 30 June 2006. In future
years, competition is also likely to
intensify between insurers that partner
with financial institutions and motor
dealers, as ongoing industry consolidation
reshapes these markets.
Business Partnerships will continue to focus on driving sustainable, profitable growth by sharing knowledge, skills and experience across its businesses and with its partners to improve customer experience and performance.
Mario Pirone
CEO, CGU
CGU continued to deliver profitable returns during the year, despite increased market competition, and the impacts of Cyclone Larry.
CGU
CGU distributes a range of commercial, rural and personal insurance products through a network of more than 1,000 brokers and authorised representatives. CGU continued to deliver profitable returns during the year despite increased market competition and the impacts of Cyclone Larry. The result reflects our commitment to disciplined underwriting and an unwillingness to write business at prices below the level we consider necessary to generate an adequate return on capital.
Renewal rates through the year remained high, particularly among small to medium size businesses and rural customers, a sign of the strong relationships we have with intermediaries in these segments.
Average premiums in commercial insurance reduced as the ‘soft cycle’ intensified during the year, coupled with the ongoing benefits of tort reform which affected the liability classes. Competition from local and international insurers increased, and was particularly strong in general liability, professional indemnity, workers’ compensation and commercial property.
To position CGU for sustainable growth, we have defined our business goals to be:
- number one in small to medium size businesses, regional and brokered personal lines;
- in the top three of other markets we compete in;
- number one in claims;
- an employer of choice;
- a leader in technology; and
- a leader in innovative solutions.
During the year, we relaunched our flagship rural package, Countrypak, with significant additional benefits, made improvements to our flagship Commercial Pack, and launched a new home warranty product for owner builders.
LENDING FARMERS A HAND WITH SAFETY
In Australia, farm-related injuries result in more than 5,000 workers’ compensation claims annually, making it one of the most dangerous workplaces in the country.
It is for this reason that CGU, Australia’s largest regional and rural insurer, launched an online risk management tool in May 2006 to help farmers identify and eliminate safety hazards.
Farm Risk Radar enables farmers to self-assess their safety performance in their own time, and provides a tailored action plan to reduce the risk of farm-related injuries.
CGU’s Head of Regional and Rural, John Evans, said feedback from farmers indicated that tackling important safety issues can be a challenge because of limited resources and often remote locations.
“By providing online risk assessment capability to farmers, we believe we can make a real difference to their safety and hopefully contribute to a reduction in the tragic toll of injuries on Australian farms,” John said.
Farm Risk Radar is the second in a suite of online tools developed by CGU. The first was developed for smash repairers and was recognised by the United Nations Association in its World Environment Day Awards for 2005, picking up the CPA Australia Triple Bottom Line Award.
We launched Farm Risk Radar, an online tool that helps our customers identify safety risks on their farms, and also developed a similar online risk management tool for our office and motor fleet customers to be launched in the current year. These tools are offered to customers as an additional benefit of insuring with CGU, and will help us to build loyalty with both existing and potential customers.
Our commitment to superior products and services was again recognised in the annual JPMorgan Deloitte General Insurance Industry Survey. Middle market brokers voted CGU Professional Risks the nation’s best underwriter for professional indemnity and directors and officers’ liability insurance for the seventh consecutive year. They also voted CGU best underwriter for home insurance.
Claims performance is one of the most important satisfaction drivers for our intermediaries and their customers. Our commercial claims service is already well regarded by intermediaries, and we introduced significant changes to our personal insurance claims service during the year in response to intermediary feedback. Key changes included dedicated service teams, greater flexibility around claims settlement, and improved communication.
During the year, we launched a secure portal for our intermediaries on our website offering customised product content, news and access to business applications. We also added a new commercial motor product to our current e-commerce suite. Overall revenue processed through e-commerce channels continued to grow.
OUR PEOPLE
Commercial and rural insurance are highly
specialised, requiring in-depth product and
technical knowledge, understanding of
legal and regulatory frameworks and
detailed knowledge of industry and
customer segments. A knowledgeable
and experienced team is integral to the
success of our business.
To address a shortage of people skilled in these fields, we launched the CGU Academy, which offers accredited technical and product training to our people. This innovative approach will both develop our existing people and enable new entrants from other industries to fast-track a career in insurance.
LOOKING FORWARD
While weak market conditions are
expected to persist, we will continue
to position CGU for sustainable profit
and business growth, while remaining
disciplined in our underwriting and
risk selection.
Our focus on business growth and retention will be achieved through improved products, services and claims management, new technology solutions and ongoing investment in developing our people.
IAG Annual Report 2005
IAG Annual Report 2004
www.iag.com.au
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