OPERATING PERFORMANCE
CONSUMER
Our Consumer business is a market leader in personal lines insurance products sold to customers under the NRMA Insurance, RACV, SGIO, SGIC, CGU and WFI brands.
RESULTS
Consumer grew its gross written premium by 5.5% to $6,119 million, as a result of rate increases to address increased claims inflation, particularly in motor, and from the first year’s income from our 20% share of the South Australian compulsory third party insurance scheme.
Premium growth also benefited from a modest increase in the number of motor policies written, especially in New South Wales and Victoria, as well as rate increases in New South Wales’ compulsory third party insurance premiums to address higher claims. While there was a slight fall in the number of home policies, particularly in New South Wales, overall home premium growth was assisted by slightly higher average sums insured.
In a dynamic and competitive environment, the business maintained high renewal levels for both motor and home policies.
Insurance profit increased to $941 million, delivering a higher reported insurance margin of 21.8% compared to 19.8% last year. The increase reflected considerably higher prior period reserve releases; net natural peril claim costs in line with allowance, compared to an overrun against allowance in the prior year; and a favourable credit spread movement of over $30 million.
Stripping out these factors, underlying insurance margin remained strong at 13.9%. This was lower than last year’s 16.0% underlying insurance margin, due to the net effect of:
- higher average claim costs, notably in motor policies, which were countered by higher rates;
- a slight drag from the stronger growth of the lower margin Satellite business (formerly the challenger business) which houses Coles Insurance, SGIO, SGIC and IAL; and
- improved profitability in the New South Wales compulsory third party insurance portfolio due to initial reform ahead of wider scheme reform which the government has listed to implement from December 2017. IAG has been actively involved in industry-wide action to address fraudulent claims in the scheme.
This year, NRMA Insurance continued to advance its digital sales and service capabilities. Improvements included: better proactive online chat and instant messaging with customers; advancements in automated cash settlement and home claim lodgement; increasing digital lodgements; and market-leading enhancements to mobile account authentication, including single-use codes and fingerprint authentication. Overall, NRMA Insurance conducted approximately 23% of new business sales and 24% of renewals online.
