IAG flags ongoing above-inflation premium increases as it prepares new RAC Insurance bid
Reporting a lower half-year profit on Thursday, IAG warned that home and motor customers renewing their policies could still expect to be hit with rises above inflation
Insurance Australia Group is flagging ongoing above-inflation premium rates as it prepares to have a second crack at buying WA’s biggest general insurer from the RAC.
Reporting a lower half-year profit on Thursday, IAG warned that while increases in premiums had moderated from their post-COVID peaks, home and motor customers renewing their policies could still expect to be hit with rises of at least 5 per cent.
That’s in excess of the increased annual inflation rate of 3.8 per cent in December, with insurers still grappling with the higher cost of repairing homes and cars.
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By continuing you agree to our Terms and Privacy Policy.Insurance has emerged over the past five years as a major contributor to household cost-of-living pressures, and premium rates are still rising.
“Compared to where we were a couple of years ago, the premium rate environment is obviously better,” IAG chief executive Nick Hawkins told a briefing with analysts on Thursday.
But “we’re still seeing costs increase (and) inflationary pressure within the business”, he said, adding rate rises were currently tracking at “mid-single digits in motor, more than that in property”.
IAG is preparing a new tilt at RAC Insurance, with the Australian Competition and Consumer Commission in December blocking a $1.35 billion sale agreement on the grounds it would likely seriously diminish competition in WA’s insurance markets and send premiums higher.
The ASX-listed, east coast insurer — which operates some of Australia’s biggest brands, including NRMA and CGU — is preparing to apply again to buy the RAC insurance business, but this time under the ACCC’s new mergers regime, which came into effect on January 1.
Mr Hawkins was not immediately available on Thursday to talk about the pursuit of RAC Insurance, but reiterated in the company’s results statement that IAG was committed to the proposed alliance.
The group’s interim results showed an 18 per cent fall in net profit to $505m after IAG took a $174m hit to cover a string of damaging weather events in Queensland after its acquisition of RACQ’s insurance division in September.
Between then and the end of December, “Queensland was impacted by 17 separate weather events, with a gross cost to RACQI of more than $800m”, IAG said.
More to come.
Originally published as IAG flags ongoing above-inflation premium increases as it prepares new RAC Insurance bid
