Business Report: Insurance Australia Group's Growth and Strategies

This report provides an executive summary of Insurance Australia Group (IAG), examining its development and growth through adopted strategies. It highlights IAG's expansion strategies, including acquisitions and market penetration, and discusses the impact of these strategies. The report also presents critical practices that faced public criticism, such as low wages and CSR activities. Furthermore, it includes an environmental analysis using PESTLE and SWOT frameworks to assess the external and internal factors influencing IAG. The organizational culture and leadership style within IAG are also analyzed, offering a comprehensive overview of the company's operations and strategic positioning within the insurance industry.

BUSINESS MANAGEMENT

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EXECUTIVE SUMMARY
In the changing global business environment, it has become essential for the management of
the firm to look at the changes their firm requires. This report presents the developments and
growth of Insurance Australia Group over the years as reflected through the strategies that
they have adopted. In the report the practices in the company that faced criticism has also
been presented. Apart from this there is a changing global business environment around the
firm and it has challenged the growth rate of IAG. Hence this report also provides the
detailed analysis of internal and external environment of the firm. At last the organisational
structure and the leadership style which is essential for the management of the firm has been
presented.

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Contents
INTRODUCTION.................................................................................................................................2
Development and growth of the organisation....................................................................................2
Two practices and its outcomes.........................................................................................................3
Environmental analysis for the involvement of organisation in context of industry..........................4
Organisational culture and leadership style.......................................................................................7
CONCLUSION.....................................................................................................................................8
REFERENCES......................................................................................................................................8

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INTRODUCTION
In the modern day the business dynamics have changed a lot from the way in which it was
operating years back. Insurance Australia Group is one such company. In the process of
surviving through years there were many strategies that were adopted by the companies so as
to ensure higher growth rate (Suriadi, et al., 2013). The global businesses have taken the path
of digital medium as well as the working culture has changed. In this changing work
dynamics it has become crucial for the organisations to manage the opportunities and threats
that are posed to their business. Several changes have been noticed in the leadership styles
among various firms. This report highlights the corporate strategies that helped in the
development and growth of the organisation from beginning till today. It also showcases the
practices of IAG that faced criticism. In the later section of the report the environmental
analysis of IAG has been done along with the organisational culture and leadership style that
is being followed within the firm.
Development and growth of the organisation
This company’s direct heritage was established in the year 1920 at the time when National
Roads and Motorist’s association (NRMA) began to provide insurance to its associates in the
ACT and NSW. In the year 1981, NRMA became one of the largest non-government home
and contents insurer in ACT and NSW. A joint venture was established among the insurance
business of NRMA and Royal Automobile Club of Victoria (RACV). In 2000 it got
demutualised separating its insurance operation and road services. This company got listed on
ASX the same year.
Their mission statement states to make world a safer place while their vision is to create the
shared value with all the customers (Insurance Australia Group Limited, 2018). Its core
competencies include such a large network of insurance firms, being operational in so many
nations, huge assets and commitment towards their business. They also have a large skilled
labour force.
Over the years of its development process from beginning to where it is today, there were
several strategies that have been adopted by the firms so as to ensure their long term growth.
In the year 1994-95 this company adopted the strategy of market penetration by opening its
eight offices in Victoria and further in Queensland. Along with this company’s most used
strategy is acquisition as it acquired SGIO group in the year 1998 which made it one of the
biggest insurer in South and West Australia. In the same year it adopted the strategy of

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market expansion where it entered Asian market by acquiring an interest in Safety Insurance
in Thailand.
Later in the year 1999, IAG created a joint venture among the insurance businesses of NRMA
and Royal Automobile Club of Victoria. Again back in the year 2001 it acquired New
Zealand’s largest general insurance firm. In 2003 IAG acquired CGU in Australia that
includes Swann Insurance, New Zealand’s NZI and Zurich Insurance’s NSW worker’s
compensation business. Further, in the year 2005, IAG used market expansion or growth
strategy where it entered into the market of Thailand and Malaysia. In 2007 it acquired UK’s
Equity Insurance Group. In 2009 IAG established a joint venture with SBI to provide
insurance products (Insurance Australia Group Limited, 2018).
In 2012, IAG acquired many firms in different parts of the worlds. For example AMI
insurance, 20% strategic interest in China’s Bohai Property Insurance Company Ltd, Kurnia
Insurans in Malaysia was acquired by its 49% owned Malaysian Associate AmG, 30% was
acquired in Vietnam based AAA Assurance Corporation. In 2014, IAG completed its
acquisition of Wesfarmers Insurance. Apart from this in the year 2015, it made strategic
alliance with Berkshire Hathaway Inc.
In 2017, IAG adopted decentralisation strategy where it distributed its functionalities into
different units. It also incorporated the strategy of product development which focused on
developing products as per the customer demands and hence ensuring data driven business
growth.
Its most successful strategy that helped in its development was Acquisition while in current
time it has shifted its business towards product diversification strategy (Insurance Australia
Group Limited, 2018). As from the above examples it can also be seen that this company has
also adopted the strategy like strategic partnership for increasing their market base.
Two practices and its outcomes
There are many practices that have been followed by the cited firm but the two most popular
types of practices which was criticised by the larger part of the community are its expansion
plans and its low wage system. After its operations in Australian sub-continent, Company
planned to expand its business in Asia. This move of expansion have been criticised heavily.
This is due to the reason that people understood that this company should have been doing its
business in Australia so that better facilities should have been provided to the company. Their

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growth or market expansion strategy has faced many kinds of criticism. But two major
practices that faced a huge criticism are as follows:
 Low wages: This Company even after having such higher growth and higher revenue,
this company has been giving lower wages to workers. Low wages have been highly
criticised by the community and its stakeholders. This was not in the interest of
community in which company is operational. The effect of this practice has resulted
in so many strikes in various parts of the world for raising their wages as per the
industry standards. Along with this, it has faced many kinds of conflicts which has
affected the goodwill of the company as well as they have also faced problems in
employee retention in some parts of the world. Many of the media journals have
mentioned it in their articles.
 CSR activities: Company has been focused on the increasing its reach in the market
but they have not contributed to the CSR activities in the same amount. Company has
not been contributing to the CSR activities as per the profits they have been making.
This did not worked in the favour of the company’s image as it faced criticism in
many parts of the world. Since insurance has been one of the major social economic
tools hence communities expected more value based business from the side of firm.
The outcome it was that its CSR reports have been poor which was not good for the
future business of the nations. Their policies regarding the welfare of the stakeholders
were having many types of loop holes. In order to make large profits, CSR has been
given lesser significance. Their cutting strategy played a major role in this. IAG have
now started to give importance to CSR activities and innovation based business
(Insurance Australia Group Limited, 2018).
Environmental analysis for the involvement of organisation in context of industry
It is essential for any organisation to understand the environment it is dealing inside the
industry (Team, 2013). External analysis is as follows:
PESTLE Analysis
 Political: There have been changes noticed in the political environment of world.
Many policies regarding the insurance industry is a challenge for the company as they
have to think about the way in which they had to transform their business. Increasing
policy restrictions on the Insurance firms have reduced the growth chances of the
company. Apart from this, there are several rules that have been imposed by the

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government to restrict the amount of capital they can invest in the insurance sector as
well as the rules linked with FDI have also changed.
 Economical: Economies in many parts of the world have faced many challenges. The
downfall of the European economy and the slowdown of the American market have
resulted in poor performance of the insurance company. This is due to the fact that
many types of insurance lapses have been registered. Apart from this due to
decreasing per capita income, people are not moving towards the insurance services.
With the financial assets that IAG has they will be able to maintain their position in
the industry even after the poor economic condition of the world (DATE, 2015).
 Social: Society has changed and so are its insurance needs. Previously it was noticed
that people after a certain age were more availing for the insurance offers but now
people at young ages are trying to get the insurance company offers. This shift has
provided opportunity for the firm. Apart from this, the changing socio-economic
domains of the communities have forced companies like IAG to rethink about their
insurance plans.
 Technological: Insurance industry is noticing a lot of changes in the technology and
its advancements. The use of technology has increased widely as it has taken the
routes of online business (Phelan, et al., 2011). Increased number of cyber-attacks on
the firms like IAG has forced them to rethink about the technology in use. IAG needs
to apply proper security measures so as to ensure that they and their stakeholder’s
privacy, security and confidentiality get ensured. This has helped the firm in reaching
to larger set of consumers and hence they can penetrate deeper into the market with
even lesser presence in the market.
 Legal: There have been changes in the legalities all across the globe. This changing
legal background have affected the business of the companies like IAG as they have
to comply with all these legalities in order to avoid any negative compliances. IAG
have faced many legal cases in various parts of the world, this has forced them to
make changes in their operational methodologies.
 Environment: Company needs to dedicate more money towards building better lives.
This includes a considerable amount of investment in making greener tomorrow.
Their business needs to be more environment friendly especially in the case of using
lesser amount of papers in their operations. Taking use of technological means will
help the company in this regards.

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Apart from this, in order to understand the involvement of the company in the industry,
internal environmental analysis needs to be done (Friesner, 2011).
SWOT analysis
Strengths
 Huge amount of financial assets.
 Larger network with various smaller companies.
 High use of technology in the business.
 Skilled and trained employees.
 Products for each and every section of the society.
Weaknesses
 Lower brand name as compared to other competitors.
 Many decisions in the past have not worked in the goodwill of the company.
 Their business practices faced criticism in the past.
 Lower investment in the CSR activities.
Opportunities
 There are many opportunities available with the cited firm in the developing nations.
 It can also come in the banking solution.
 With increasing economic breakdowns in various parts of the world, there is a chance
that larger population can come into their target section.
 It is having larger opportunities in the cross selling with the help of new vendors in
different markets (Klettner, Clarke and Boersma, 2014).
 This company can focus more on the health insurance as it is expanding at much
faster rate.
Threats
 Economic fluctuations in various parts of the world have restricted the firm to make
investments in their business.
 Many examples of insurance company failures have been noticed in various parts of
the world.
 Increasing labour demands have gone against the company’s policies.

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 Political ties have been unstable in many corners of the world which is directly
indirectly affecting the business of IAG.
Organisational culture and leadership style
Their organisational culture is towards promoting the best work from the employees. In their
culture they have promoted rewards for good performance, respect for stakeholders, integrity
and sense of urgency (Insurance Australia Group Limited, 2018). According to their culture
they have designed their organisational structure where they have focused towards making
the balance between its core business and their responsibility to give fair and stable outcomes
to their shareholders. Apart from this, they believe in team culture where everyone shares
their diverse ideas and each one of them is entertained. This culture has helped them in
finding solutions to the problems that are exist in the business. Their culture promotes
continuous learning and development. They have implemented diversity in their management
as well as at their workplace.
Their core values include confident communities, governing for shared values and
sustainability, awards and recognition etc. There have a strong commitment for safer,
stronger and more motivated community. They have made principles for sustainable
insurance.
Apart from this their core competencies includes their reach to larger number of the
population all around the world. IAG labs have been designed for having higher research that
will help in providing higher consumer satisfaction. Use of advanced technologies in their
working process has helped them in gaining competitive advantage. This has also helped
them in serving larger part of the community.
Their CEO has been their prime source of motivation as he has motivated many workers,
implemented and developed the strategies successfully. He has also successfully created the
unique culture within the organisation which has helped them in reaching to where he is
(Insurance Australia Group Limited, 2018). He is known for his democratic style of
leadership in which he has included many stakeholders in their decision making process. He
has been excellent supporter of team culture and diversity at the workplace hence he has
employed women at various management positions. Most number of employees has been
employed at the level of line managers.

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CONCLUSION
From the above report it can be concluded that IAG has been doing business in different parts
of the world. They have been using various kinds of corporate strategies for their
development and growth from the time it was established till today. Acquisition and strategic
partnership has been one of the most widely used growth strategy. They have also faced
criticism because of their practices like low wages and lower investment in the CSR related
activities. Both these have impacted on the image of the firm. There have been lot of change
that took place in the Insurance industry and no company has remained untouched with it.
They have adopted team culture within the organisation as well as they believe on continuous
learning and development. Their CEO has been one of the greatest supporters of the values
that IAG believes in and has maintained diversity at various levels of the organisation.
REFERENCES
DATE, F.D., (2015) INSURANCE AUSTRALIA GROUP LIMITED PRELIMINARY
FINAL REPORT FOR THE YEAR ENDED 30 JUNE 2015. CHANGE, 1000, p.2014.
Friesner, T., (2011) History of SWOT analysis. Marketing Teacher, pp.2000-2010.

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Insurance Australia Group Limited, (2018) Chief Executive Officer’s Review. [Online].
Available at:
https://www.iag.com.au/results-and-reports/FY2015/chef_executive_officers_review.html.
[Accessed on 8th may 2018].
Insurance Australia Group Limited, (2018) Corporate governance. [Online]. Available at:
https://www.iag.com.au/about-us/corporate-governance. [Accessed on 8th may 2018].
Insurance Australia Group Limited, (2018) Group Leadership team. [Online]. Available at:
https://www.iag.com.au/about-us/group-leadership-team. [Accessed on 8th may 2018].
Insurance Australia Group Limited, (2018) Our history. [Online]. Available at:
https://www.iag.com.au/about-us/who-we-are/our-history. [Accessed on 8th may 2018].
Insurance Australia Group Limited, (2018) Purpose and strategy. [Online]. Available at:
https://www.iag.com.au/about-us/who-we-are/purpose-and-strategy. [Accessed on 8th may
2018].
Insurance Australia Group Limited, (2018) Shared value. [Online]. Available at:
https://www.iag.com.au/creating-shared-value. [Accessed on 8th may 2018]
Klettner, A., Clarke, T. and Boersma, M., (2014) The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics, 122(1), pp.145-165.
Phelan, L., Taplin, R., Henderson‐Sellers, A. and Albrecht, G., (2011) Ecological viability or
liability? Insurance system responses to climate risk. Environmental Policy and
Governance, 21(2), pp.112-130.
Suriadi, S., Wynn, M.T., Ouyang, C., ter Hofstede, A.H. and van Dijk, N.J., (2013) June.
Understanding process behaviours in a large insurance company in Australia: A case study.
In International Conference on Advanced Information Systems Engineering (pp. 449-464).
Springer, Berlin, Heidelberg.
Team, F.M.E., (2013) PESTLE Analysis. Strategy Skills. Free management ebooks, p.15.

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