IAG boss Nick Hawkins is fighting cost pressures on two fronts. Claims cost inflation may well moderate, but climate-related costs are a different story.
The results of insurance giant IAG contain a grim message for households battling surging living costs: get used to it.
Claims cost inflation, which Macquarie recently estimated is running at 10.3 per cent for motor insurance and about 8.4 per cent for home insurance, is Hawkins’ immediate concern. Claims costs have moderated a bit in recent months, but IAG’s forecast is still for growth of between 5 and 10 per cent in the 2024 financial year.
The appetite to provide reinsurance to Australian insurers is still solid enough – IAG recently renewed its long-dated quota share with the world’s four largest reinsurers until the end of the decade – but again, securing supply comes at a cost. In 2018, gross reinsurance and perils costs as a percentage of gross earned premium was 14 per cent; in 2024, it is projected to hit 20 per cent.
IAG’s forecast is for gross written premiums to rise in low double digits in the 2024 financial year and its insurance profit margin to rise from 9.6 per cent 2023, to between 13.5 and 15.5 per cent; that implies growth of 65 per cent at the midpoint.
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