More premium pain coming but customers sticking with cover, IAG says

afr.com:

Insurance giant IAG has warned premiums will keep rising, blaming inflationary pressures and the cost of protecting itself from large disasters.

Premiums for Australian home insurance were rising by about 20 per cent and car cover more than 15 per cent, the company behind brands including NRMA and CGU said on Monday.

More premium pressure: IAG CEO Nick Hawkins.  Louie Douvis

The increases come amid increasing concerns about policy affordability, but IAG matched other insurers in asserting that customer retention remains high.

IAG’s profits rose to $832 million for the 12 months to June 30, up from $347 million. The result included a turnaround from losses in investment markets a year ago, and the release of $392 million previously stocked away for pandemic-related business claims that did not eventuate.

The 2023 financial year included IAG being hit with $1.206 billion in natural disaster costs, above initial expectations of $909 million. That included more than $250 million from New Zealand floods and cyclones in the June half, when it experienced comparatively benign weather in that period in Australia.

The industry is currently pushing through massive price rises, and some inflationary pressures, such in motor insurance, appear to be easing.

But IAG chief executive Nick Hawkins brushed aside questions about whether insurers would be over-earning with an El Nino dry period predicted to arrive this financial year. “In my 23 years at IAG, I’ve never seen inflation like we’ve experienced,” he told The Australian Financial Review.

“I’ve never seen us have to manage the way we have to manage through cost of reinsurance and perils either.

“There’s a few things that I think are a little bit unique at the moment that we’re