Our approach
Insurance is about sharing risk across the community, so it is important for us to engage in the communities in which we operate to help them reduce and manage their risks.
We take a strategic approach to community investment, seeking partnerships which enable us to share our knowledge and promote initiatives that reduce risk at home, on the road and in the broader community.
For IAG to be a sustainable organisation, the communities that we operate in need to thrive as well. We also understand that our investment in the community and community groups is very important to our employees.
Rather than a narrow focus on community investment, IAG takes a community engagement approach, which encompasses a two way dialogue and a commitment to addressing community issues, as well as financial support.
As an insurance group, IAG has a deep understanding of risk and how to mitigate it. So it makes sense that we share this expertise with the community, helping reduce the risk of unexpected loss. There’s a clear primary community benefit in reducing risk, as well as a secondary one – a lower level of risk has the potential to increase the affordability of insurance premiums, making communities more resilient.
By aligning our approach to community investment with our core business strategy – reducing risk – we are ensuring that the community partnerships and programs that we establish and run are value added. This alignment also means that we have a clear understanding of the materiality of the risks involved – we see the impact of crime, weather events, car accidents and housing damage through our own performance and claims data.
Community investment takes the following forms:
Community partnerships: collaborating and working with community partners to reduce risk, by promoting initiatives which reduce risk at home, on the road and in the workplace, or which help communities adapt to climate change related risks. For example, through our Direct Insurance division, we offer Community Grants to groups looking to reduce risk at home and on the road, or help communities become more sustainable.
We also strive to be active partners with community groups, contributing skills and time as well as money to address community issues. For example we partner with number of community organisations such as the SES, the Salvation Army, Kidsafe and also Mission Australia who support young people exiting the juvenile justice system, helping ensure they don’t re-offend.
Employee involvement: To be truly effective, all levels of our organisation need to have a community focus. We promote this through one day of paid volunteering leave per year, allowing our people to participate or contribute to their local community. Our people have a diverse range of skills and knowledge, and we want to ensure they have the opportunity to leverage this in the community. Working in the community also gives them the opportunity to develop new skills and work in a different environment. One example of this is our on-going involvement with the Australian Business Community Network, a partnership of business leaders and companies that work on coaching and mentoring programs with schools in areas of need to support both the students and education providers.
We also run a workplace giving program and, for selected charities, match employee contributions dollar for dollar.
Possibly the most visible way in which we interact with the community is in the way we respond in the wake of a natural disaster, helping communities rebuild in the wake of a large storm or other natural peril.
The resilience of the community to extreme weather events depends in part on how much insurance the community holds, so we seek opportunities to educate people on the importance of insurance to help combat underinsurance. We are also liaising with Government on reducing the tax burden on insurance, making it more affordable.
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Our performance
Insurance is about sharing risk across the community. Therefore we engage in the communities that we operate in to help them reduce and manage their risks. By integrating our approach in this way to align with our core business, we ensure that the initiatives that we are driving and the relationships we are forming are sustainable.
This year our community investment was stable in real terms, totalling over 9% of our Net Profit After Tax, compared to just over 4% in the prior year. Internally in our Australian business we have recognised that our staff engagement with our community programs is not as high as we would like it to be. We have seen Workplace Giving falling and only a small percentage of our staff utilising their one day of paid volunteering leave. To ensure community programs are relevant to our operating businesses, each division is responsible for their own community engagement, and our Corporate Office, Direct Insurance and CGU businesses have recently undertaken a review of the way that we look at community engagement and investment. We have engaged our employees through surveys and discussions, and we have looked at our community partners, our workplace giving program and the volunteering opportunities that our employees have.
For example, our CGU business has recently established its Community Engagement Program to provide a way for CGU and Swann to engage more effectively with charities and community groups - and for staff to be more involved in community activities. The Program's guiding principle is: "To provide a helping hand to our Australian community that goes beyond our insurance services - offering support to the ill, the disabled and disadvantaged while advancing the wellbeing of our environment."
When the Program is fully operational in FY11, CGU and Swann will provide focussed support for a group of preferred charities, through staff workplace giving, volunteering, fund raising and support for particular projects. This will complement CGU's and Swann's continued support for staff conducting fundraising and volunteering for a wider range of charities.
This approach has paid off in our New Zealand business, which has reframed its performance management system so that volunteering activities now count toward employees’ overall ratings, and made it easier for staff to find volunteering opportunities, by creating an in-house volunteer noticeboard. This has driven a significant upswing in the number of employees volunteering, with 33 per cent of IAG New Zealand's staff taking a volunteer day in 2009/10.
Effectively contributing to our communities also means understanding and responding to issues relevant to insurers and financial services providers more broadly. For example, we have been engaging with and lobbying the Australian government on the protection of shareholder registers, and laws which restrict access to registers – thereby protecting our retail shareholders from unsolicited offers to buy their shares at below market value.
Like many other companies, we have historically measured our community investment by focusing on the inputs rather than on the output or impact of that investment. It’s not always possible to quantify the economic or other benefits of community investment and the challenges associated with measuring and communicating the intangible benefits, more qualitative benefits that are realised makes this a very difficult task. Where we are able to quantify an impact, this tends to be at a specific program level. For example, our Direct Insurance partnership with Mission Australia to support early intervention programs for youth at risk in South West Sydney has resulted in an 86% reduction in criminal offences by the participants since program completion. It is though hard to quantify the proportion of this impact that is solely attributable to Direct Insurance’s support.
However, while the benefits and value of community investment and partnerships may be difficult to measure, they are undeniable. It is clear to us that a thriving community is a key plank to having a thriving organisation. We recognise that as an organisation our investment will have a direct impact on our business through the reduction of risk. You also cannot underestimate the pride that employees feel through our community involvement.
We continue to measure community investment through inputs – cash, in-kind contributions, time given and where possible impacts and outputs. Targets for community investment are set at a partner level and we monitor our performance against these commitments. We also benchmark our activities, using such groups as the London Benchmarking Group, and we are continuing to investigate ways that we can better measure the impact of the investment that we make. Our view is that community investment remains a sound investment choice even in difficult economic times. As well as reducing risk, it provides engagement benefits, and helps us build stronger communities which, in turn, support our continued growth.
Over the past few years we have been reviewing our community spend to ensure it remains relevant to current community issues that also relate to what we do as a business. Our Direct Insurance business in Australia is our largest business, and as such continues to drive a significant proportion of our community investment. Direct Insurance is in the process of transitioning support from CareFlight to new opportunities that align with the business' priority of helping to build safer communities. Whilst this has been one of the factors for lower community spend in Australia this year, Direct Insurance continues to support communities at a national, state and local level, in particular through the Community Grants program which this year provided grants to 139 community organisations around Australia, as well as through a number of other significant partnerships.
We are also continuing our close relationship with the Australian Business and Community Network (ABCN), which sees business leaders and companies take mentoring roles in the community. Our Direct Insurance division has had 65 employees participate in ABCN programs, including high school reading and mentoring programs.
In addition to an increase in staff volunteering, our New Zealand business has had a 400% increase in community investment compared to prior year. This is the result of some significant new sponsorships, in Surf Lifesaving NZ, Swimming NZ and Ocean Swim NZ and an increased investment in the State Driver Reviver Program.
Community sponsorships make up 59% of our community investment in Australia and include our continuing support of the Queensland Fire and Rescue Service, Kidsafe and FarmSafe Australia, which is a central plank of CGU’s community strategy to encourage safety in the workplace.
Similarly to our Australian business, our UK operations are currently developing a charitable policy that will give them a consistent approach to community investment and donations and this will include a central budget. Spend and donations made have not been captured consistently or centrally therefore we have not reported this year on a community investment spend for the UK.
Community investment in Thailand takes on many different forms, including monetary donations and staff participation in varied events such as manning ‘driver reviver’ stations or planting trees. For example, this year our Thai businesses participated in 5 blood bank drives in which the Thailand staff donated blood. Again we have not reported the level of community investment that our Thai business has achieved as this is not recorded centrally.
Case studies
In the case studies below we outline some of the initiatives that have driven our community investment.
Combating underinsurance through fairer tax
Making communities safer
The online community
Our people in the community
Protecting shareholder interests
Managing supplier relationships for the long term
| Combating underinsurance through fairer tax |
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Every time an insurance customer makes a claim, insurance proves its worth. And when there’s a natural disaster, the value of insurance – and the negative impact on those who don’t have it - is magnified. This has an impact not only on individuals, but on entire communities, particularly when a significant number of those affected are underinsured, or not insured at all.
According to recent Insurance Council of Australia figures, approximately 23% of Australian households have no home or contents insurance1. What this means is that non insurance and underinsurance remains a significant issue in our community. As such one of IAG’s priorities is to educate the community on the risk of under or non-insurance. To do this, we run joint campaigns with our community partners to encourage the community to prepare their homes to help prevent the risk of property damage, for example through weather events. We also encourage consumers to check their level of insurance cover and engage with IAG in other ways rather than just at sales and claims time.
However along with the lack of understanding, another significant barrier to the uptake of insurance is cost – insurance can be considered by some as simply too expensive. Given that a significant proportion of this cost is driven by taxes and levies on insurance imposed by various levels of Government, we have been working with the Government very closely on this issue.
Let's look at the impact of taxes and levies on insurance. When an individual customer or business takes out an insurance policy, they are doing so to protect themselves against unexpected events, for example if they experience an accident in their car or their property is damaged. On taking out a policy, each customer or business pays an insurance premium, which we put into a pool with premiums that other customers and businesses pay us. If an individual or business ever needs to make a claim on their insurance, we use funds from this pool to pay for the losses covered by their policy.
However in Australia, it is not just the premium charged by IAG that the customer or business pays for when they purchase a insurance policy. There are other insurance taxes and charges that IAG collects on behalf of the government that are also included, for example GST, insurance transaction taxes and stamp duties and in some states insurance companies are required to contribute directly to the funding of fire services. For example, currently, in some Australian states including NSW and Victoria, fire services are funded by a levy on insurance policies.
While under and non-insurance remains a complex issue, fire services levies and insurance stamp duties are a real disincentive in the following ways.
- The current levy is unfair on the insurance customers who pay it, making insurance customers pay for fire services that benefit the whole community, driving the cost of insurance out of the reach of some potential customers;
- In the wake of a significant claims event, all taxpayers foot the bill when the public purse is inevitably called upon to help those in need who were not insured; and
- The levies are also imposed on the total premium, which includes the full range of perils including storm and theft, and in NSW it is calculated on top of stamp duty and GST, making it a tax on a tax on a tax.
Reform of the current fire services funding system for example, with a move towards a fire services funding system which encourages full value insurance, with all property owners sharing responsibility for the funding of fire services, rather than just those that are insured. This would result in economic and community benefits especially with regards to underinsurance. We believe that the most effective way of achieving this end, is to implement a system that sees all property owners sharing the responsibility for funding fire services.
IAG has been very vocal in this space and has made a number of submissions on the issue. We have welcomed the recently released Henry Review’s recommendation that “all specific taxes on insurance products, including the fire services levy should be abolished”. IAG also welcomes the Victorian Government’s announcement it would abolish the fire services levy, following the recommendation of the Victorian Bushfire Royal Commission. This positive tax reform will help improve the community’s resilience and ability to recover from major catastrophes, by making insurance more affordable. We look forward to continuing to work constructively with the Government as it implements this reform.
These examples illustrate the impacts of taxes and levies on customers and communities. Insurance plays a critical role in the economy and community; however, the current taxation system is penalising insurance relative to other more discretionary purchases. We stand ready to work collaboratively with Governments as and when they move to implement the Review’s or any other recommendations.
1 The Insurance Council commissioned the study “The Non-insured: Who, Why and Trends” into non insurance by Dr Richard Tooth and Dr George Barker of the Centre for Law and Economics at the Australian National University to add to the body of knowledge on non insurance in the Australian community.
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| Making communities safer |
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As a risk manager, we see an important role for our group in working with communities to help them manage their risk at home, on the road, and in the workplace, building stronger communities which in turn contribute to our own sustainability.
As part of this approach, our operating businesses seek to partner with community groups and organisations which share our focus on managing risk.
In NSW, Direct Insurance’s biggest market, partnerships with Mission Australia and the NSW Police are helping reduce crime, and making communities safer.
NRMA Insurance, Direct Insurance’s business in NSW, partners with Mission Australia to support early intervention programs for youth at risk in South West Sydney.
The programs are aimed at reducing the number of youths who re-offend after being released from Juvenile Justice, having committing crimes such as theft, breaking-entering, stealing from both property and cars, as well as stealing cars. They provide participants with employment skills, life skills, access to education and training
Since the partnership began July 2009, 25 youths have completed the programs, with encouraging results:
- Seven participants have successfully gained employment
- Seventeen have gained education placements
- There has been an 86% reduction in criminal offences by the participants since program completion, alleviating the burden on the community and police resources in ‘processing’ juveniles through the justice system.
Direct Insurance takes a broader approach to crime prevention through its partnership with NSW Police. Since 2003, NRMA Insurance has been collaborating with NSW Police on crime prevention initiatives in Dubbo, Shell Harbour, Redfern and Gosford.
This year, the program has expanded to a range of Local Area Commands across NSW. The partnership includes a Crime Prevention Van that travels the state with information for householders on making their homes and vehicles more secure; the Good Neighbour Program which encourages people to look out for each other; and Community Safety Forums in targeted areas that engage local residents, increase awareness of crime prevention measures and create the opportunity for people to establish social networks by getting to know their neighbours.
Activities are coordinated by NSW Police representatives, NRMA Insurance representatives and local council representatives.
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| The online community |
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Increasingly, important community discussion and interaction takes place online – and to remain relevant and able to help, insurers need go where the community leads them, including onto the web and social media.
Building an online community, and interacting with the community online, is one focus of IAG’s online insurer, The Buzz.
The Buzz was created with feedback from the community. And now, The Buzz is providing an online platform to help address a burning community issue – the safety of young drivers.
Parents with Ps is a Facebook forum for parents of P plate drivers, designed to help them become better informed and confident in guiding their children through the learning process. The goal of the community is to help parents have a positive impact on their childrens’ driving behaviour and ultimately reduce the number of crashes involving young people on Australian roads.
The community grew out of the results of a survey commissioned by The Buzz, showing 93% had seen P platers driving too fast and not obeying road rules, with 83% citing lack of experience by P platers as an issue.
An industry first, Parents with Ps gives Australian parents a platform to discuss all facets of teaching and supervising their childrens’ driving behaviour.
It also enables parents to access information and practical tools, such as Parent/P Plater Driving Agreements.
The resources for the community are developed in consultation with an online advisory committee which consists of Buzz customers, associates and industry experts who are also ‘parents with Ps’.
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| Our people in the community |
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One of the ways in which IAG encourages staff involvement in the community is by giving each staff member a paid volunteer day in addition to annual leave, which can be used for volunteering activities in the community.
This is important from an engagement standpoint as well as a community perspective – engagement surveys show our people value IAG’s role in the community, and want to participate.
And a fresh approach to encouraging people to take that leave has contributed over 4,500 hours to New Zealand communities.
In 2009/10, IAG New Zealand reframed its performance management system, My Performance. And one of the changes means volunteering activities now count toward employees’ overall ratings as part of their performance review.
The volunteering days, and their importance, were highlighted to employees as part of Give Back Month, in February 2010.
And, importantly, IAG New Zealand made it easier for staff to find volunteering opportunities, by creating an in-house volunteer noticeboard, with information from Volunteer Auckland, Volunteer Canterbury and Volunteer Wellington on organisations needing help. IAG New Zealand also developed a list of about forty suggested organisations needing volunteers, to help ensure our people can select a community organisation which reflects IAG’s values and focus on risk reduction.
The end result has been a significant upswing in the number of employees volunteering. Thirty three per cent of IAG New Zealand's staff took a volunteer day in 2009/10, equating to just over 621 days or 4,677 hours. The monetary cost of the time spent in the community by IAG New Zealand's people is NZ$138,426.
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| Protecting shareholder interests |
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IAG has one of the largest retail shareholder bases in Australia with 865,000 shareholders, and we are committed to delivering value for them as well as for our institutional shareholders.
Delivering value includes protecting our shareholders’ interests. In the context of retail shareholders, one way in which we do this is through warnings regarding “low-ball” offers – offers made directly to IAG shareholders, to buy their shares for below market value. By our own estimates, IAG shareholders have forfeited approximately $17m in value over the last 8 years, by taking up these ‘low-ball’ offers.
We have taken number of steps to try to ensure that retail shareholders are aware of the current market value of their shares and able to make an informed decision on such offers, including:
- writing to all Australian shareholders individually on two occasions to warn them of potential offers that were going to be issued to them;
- writing to Australian shareholders to advise them of alternative methods for disposal of their ordinary shares at market value;
- inserting the market value of each holding on six-monthly dividend notices;
- adding a warning to shareholders on their dividend statements that they may receive an unsolicited share offer undervaluing their shareholding;
- issuing media releases and liaising with the media extensively whenever new offers are issued; and
- posting warnings on our website and on the ASX announcements platform.
Another way in which we have been addressing this issue is through engagement with the Australian Government, on the need to protect shareholders by restricting access to share registers to those who pass a proper purpose test, to balance the interests of shareholders and that of the person seeking access to the register.
We have welcomed proposals announced by the Australian Government to change the laws governing access to company share registers. We believe the Government’s proposed changes will ensure that the improper uses of company registers will be eliminated, while continuing to facilitate legitimate and beneficial access. We look forward to the implementation of these proposed changes.
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| Managing supplier relationships for the long term |
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To be sustainable and successful, we need to make sure we are working with the right people externally as well as internally.
This is why our relationship with suppliers is crucially important – not only do they supply us with the goods and services we need to continue to operate, but their performance affects our performance.
As a result, we take a partnership approach to relationships with suppliers, collaborating with them to help ensure they:
- Share our values and focus around business sustainability;
- Understand the key dimensions and drivers impacting business sustainability;
- Are aware of issues, risks and opportunities that are relevant to their supply chain operations; and
- Have management systems in place to address associated issues, risks and opportunities (for higher spend and higher risk suppliers).
To facilitate our partnership approach with suppliers, IAG Group Procurement has reviewed its supplier management framework to more closely align it to our own corporate performance drivers. This applies across IAG’s range of suppliers, including corporate wardrobe, fleet, logistics, office supplies, print, print output devices, promotional merchandise, training and travel. This has involved broadening the focus of how we engage with our suppliers on sustainability beyond environment, to all aspects of sustainability which influence our performance. Suppliers are now assessed on:
- Quality of performance;
- Commitment to IAG strategy and requirements;
- Value for money and price;
- Business sustainability; and
- Innovation and Technology.
One important change in the supplier management framework was the inclusion of business sustainability as a factor against which suppliers are measured, as a recognition that it is in IAG’s interests that our key suppliers are around for the long term.
As with our own performance, we measure supplier performance against five levers. In the context of suppliers, this means:
Economic: financial metrics such as supplier net profit margin, revenue growth, quick ratio, percentage change in receivable days, together with governance measures such as ethical business practices, a demonstrated commitment to disaster recovery and risk mitigation for business continuity.
Customer: ensuring agreed service levels are achieved, helping suppliers understand our needs and provide innovative products and services that meet these needs in an effective and timely manner.
Workforce: ethical workforce management.
Community: demonstrated community commitment and partnering.
Environment: demonstrated commitment to environmental improvement.
Our focus also extends to our suppliers’ suppliers. We work with suppliers to ensure their third party providers are also aware of the key dimensions which represent business sustainability at IAG.
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