Insurance Australia Group (IAG): A Business Analysis Report

This report provides a comprehensive analysis of Insurance Australia Group (IAG), a leading insurance provider in Australia. It begins with an executive summary and table of contents, followed by a detailed exploration of IAG's history, tracing its development and growth since the 1920s, including key acquisitions and strategic moves. The report then examines criticisms leveled against IAG, such as allegations of fraudulent practices and issues related to claims payments, along with the outcomes of these criticisms. Furthermore, it identifies opportunities and threats facing IAG, including market dynamics, technological advancements, and competitive pressures. The report concludes with an overview of IAG's organizational culture, emphasizing its commitment to diversity and employee development. The report incorporates references to support its analysis.

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Executive Summary
The Insurance Australia Group is one of the leading insurance providers in Australia. The
company has a long history that goes back to 1920 and as such IAG has vast experience in
insurance provision of insurance services. The essay explores the history of the company while
paying attention to the strategies that the company has been using in the past and strategies that
the company is employing currently. The essay expounds further some of the criticisms that have
been level against the company and on the last part, the organizational culture is explained with
regards to operations of IAG.

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Table of Contents
Development and Growth Of IAG…………………………………………………………………………………………………………….4
Criticisms and their Outcomes………………………………………………………………………………………………………………...5
Opportunities and Threats……………………………………………………………………………………………………………………….6
IAG’s Organizational culture…………………………………………………………………………………………………………………….7
References...................................................................................................................................................8

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Development and Growth of IAG
The storyline of IAG can be taken back to the early 1920s when an association by the
National Roads and Motorists was established and began its operations of delivering insurance
services to its affiliate members in NSW across CGU business and has since been providing
insurance products for more than 160 years in Australia (Insurance Australian Group Limited,
2018). In 1998 NRMA played a critical role of acquiring SGIO ranked as one of the largest
provider of insurance products that are related to fire, and SGIO was also the primary provider of
general insurance in Western Australia. NRMA also extended its operations beyond and across
the Asian market and was attracted majorly by safety insurance in Thailand.
In early 2012, IAG completed a business deal that saw the purchase of AMI insurance
positioned as the second largest insurer and a provider of direct personal lines as at the time in
New Zealand. Towards the end of 2012,49% of AmG, a Malaysian firm owned by IAG
facilitated the acquisition of another Malaysian firm, Kurnia Insurans prompting AMG as the
largest provider of general insurance in Malaysia as the company commanded 13% of the
Malaysia market in the provision of general insurance and was the leading in motor vehicle
insurance (Insurance Australian Group Limited, 2018). In mid-2012 saw IAG acquire more than
30 % of a Vietnam based Assurance firm, AAA which saw the company increase its presence in
a growing market for the insurance products through an established partner, AAA.
In 2013, closed a business deal that saw Equity Red Star enterprise being sold to Aquiline
Capital Partners, a disclosed private equity enterprise firm that specialized in delivering financial
services for more than $ 130 million (Witcomb, 2013). Towards the close of 2013, IAG agreed
to purchase Wesfarmers underwriting segment for $1.9 billion and this strategic as it
strengthened IAG’s positioning domestic markets of Australia (Insurance Australian Group
Limited, 2018). The acquisition entailed Wesfarmers underwriting enterprises that trader under
the alias WFI and brands from Lumley Insurance as well as one-decade distribution consensus
with Coles.
In 2017, IAG made announcements with regards to the launch of Firemark Labs, an
innovation hub involving InsurTech and was stationed in Singapore (Insurance Australia Group
Limited, 2018). This move will ensure that it links the insurer to the network of global
innovation and the vibrant entrepreneurial society in Singapore. The hub will serve as IAG’s
incubator as it will facilitate the working of top talents, research, and partners in technology
which will ensure the creation of new products and services thus improving client experience
across Australia all the way across Asia. In July of the same year, IAG revealed its mission of
developing a Unit Australian division, this would simplify the operating model adopted by IAG
it would bring together the former Australian Consumer, Australian Operations, and other
satellite Divisions together. In July, IAG accepted and established the modern innovation
incubator, the Firemark Labs Sydney that served as a component of its long-term strategy of
generating expansion of business based on client-led and data-driven information. The incubator
will play a critical role in linking talents from IAG, capabilities, and insights with outside
partners who may help IAG craft new client experiences for today and the future.
Criticisms of IAG business operations
Alleged allegations with regards to fraud against insurance companies have facilitated a
move by consumer groups that suggest that fraudulent sale malpractices are endemic in the

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insurance market. One of the former workers who worked with Combined revealed how agents
get desperate and as such opted to maximize commissions by duping consumers entailing
vulnerable Australians (Insurance News, 2015). This is just one illustration of criticism of the
operations of insurance companies that have a presence in both Australia and New Zealand has
been dealing with criticisms both from the inside and outside that have in one way affected its
operations as illustrated in the cases below.
With the last remaining boardroom that connects Insurance Australia Group to the last stages of
the company being listed as independent from NRMA, monitoring enterprise could have been
broken following the impending exit of James Strong who had acted as the chairman for more
than seven years.
Mr. Strong was strategic in the operations of IAG as he led the company in realizing
record profits, however 2007 ignominious $260 million in net loss announced in 2008 made the
chairman to reveal his intentions of stepping down during his tenure as the director and quit the
board even before his retirement that was to be scheduled in 2011 (John, 2008). His decision to
resign came after a traumatic period for the IAG, recognized as the proprietor of some of the best
brands in Australian insurance market. However, the earnings had been dropping for three years
in a row following the loss of Michael Hawker a chief executive officer and the company,
fortunately, survived an attempt for a controversial takeover by QBE. Mr. Strong assumed the
position of chairman in 2001 a year following IAG float attempts and bore criticism for being
responsible for the fall of company’s value exacerbated by the wrong timing of investing close to
$2 billion in British territories for two years (John, 2008). The board under the new chief
executive, Mike Wilkins sold most of the British enterprises. The announcement made by Mr.
Strong of the impending departure was helpful in easing tensions from the criticisms leveled
against him in one of the IAG’s board meeting in Sydney, though it did not stop close to 20% of
investors voting against being re-elected (John, 2008). He shared his intentions of serving as the
chairman for an unspecified period so that he could provide stability and continuity of the
company and would help the management in turning the company towards the right direction.
Not paying claims
The perennial criticism leveled against insurance industry is that it neglects to do the job
it was tasked to deal with and the continue unwillingness to pay claims. However, IAG claims
that this is not true as the reports by financial ombudsman indicate the 98% of the claims made
with regards to insurance have been paid without disputes (IAG, 2012). The company continues
to state that clients who make the claims have shown higher levels of satisfaction and are more
likely to stick with IAG for more services. The company asserts that the perception of people
with regards to the performance of the insurer is undoubtedly propelled by the comments they
hear from other parties. In a recent research survey conducted, it indicated that approximately 16
% of clients fail to trust insurers to pay their claims (IAG, 2012). That can be equated to one in
five people and is an alarming number that the industry should address.
However, such data is undesirable with regards to the Queensland floods. If interest is
taken regarding the topic one would be left with the notion that insurers such as IAG never pay
claims. The storms and the flooding began at the end of 2010 and led saw thousands of
individuals being evacuated from towns and cities and three-quarters of Queensland was
declared a zone of national disaster. Days later, thousands of houses in places such as Brisbane
got inundated due to the rise of Brisbane River.

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Opportunities for Insurance Australia Group
Key competencies in an organization can facilitate achievement of success in other similar
related products. A good example that can demonstrate this is the GE healthcare research that
was critical in facilitating the development of better drilling machines in the oil sector (Fern Fort
University, 2017). The development and growth of the market will enable dilution of
competitor’s edge and assist Insurance Australia Group to raise its competitiveness with regards
to other key competitors.
The economic prosperity and the increase of consumers’ disposable income that
facilitates an increase in their spending habits following years of recessions and slow economic
growth rate presents Insurance Australia Group a perfect opportunity to capture new clients and
increase its share of the market (Witcomb, 2017).
The development of new technology presents platforms for the Insurance Australia
Group to norms of differentiated pricing mechanisms in a new market (Fern Fort University,
2017). This will assist the company in maintaining its group of loyal customers while at the same
time lure a new segment of clients through value-oriented propositions.
The decreasing costs associated with transportation due to lower prices of shipping will
also cut down the operational costs of Insurance Australia Group’s products thus according to the
company the opportunity to boost its profitability or transfer the benefits directly to the
customers facilitating a gain of market share.
The existence of free cash flow that is stable is an opportunity for the company to invest
in other product segments (Fern Fort University, 2017). The availability of lending facilities by
financial institutions such as banks allows IAG to invest in modern technologies as well as in
developing new product niches. This should facilitate the opening of a new window of avenues
for IAG in other product segments.
Threats
The growing strengths of local insurance firms present threats in some established
markets since competition makes local insurance firms incur higher margins (Fern Fort
University, 2017). Also, limited skilled employees in some specific global markets present a
threat to a stable stream of profits for the IAG in such market niches. The other potential threat is
that which pertains to the demand of products that are profitable as it is seasonal and any
unforeseen events in the peak season could negatively impact on the profitability of IAG’s
operations in the short-term (Chatterjee & Daga, 2018). With the increase of intense competition
has seen stable profitability attract a number of firms in the industry increase in the past two
years and this has led to a downward pressure not only on the firm’s profitability but also on the
overall sales generated (Reuters, 2018). The issue of variations in the applicability of liability
laws is different in different countries and IAG may fall victim to liability claims that vary in
policies in such markets. The environmental regulations developed under the Paris Agreement in
2016 may be a threat to particular existing product segments. The increasing concerns to have
wages increased to $15 per hour and increasing prices exhibited by the Chinese market can
mount grave pressure on profitability made by AIG as it will see the profit margins greatly
reduced (Fern Fort University, 2017).
The organizational culture of IAG

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IAG is dedicated to developing a workforce and culture where IAG respects and values
the varying experiences exhibited by different people in the workplace (IAG, 2017). The
company welcomes and embraces the opportunity and benefits that arise from business
opportunities by encouraging the concept of diverse ideas and opinions for the benefit of the
organizations and stakeholders in general. The company recognizes the importance attracting and
retaining employees with the right skill set as they are crucial in propelling future success for the
company and attain the overall goal of making IAG a globally respected company that provides
general insurance policies to companies.
Diversity is important for AIG as the company understands that talent is not fixed to one
gender or group of individuals. Tapping and maintaining business leaders that are passionate
about AIG’S customers has been the pillar behind the company’s success (IAG, 2017). The
company has a culture of prioritizing and putting the needs of its clients first and this is the sole
reason why the company values employees that adore AIG’s customers. Having diverse skill sets
and experiences promotes creativity and innovation which facilitate IAG’s optimal financial
performance.
AIG also focuses on gender improvements, tribal diversity, and age in their organization.
The company believes that improvements in such areas boost the support needed for its
employees through sustainability of workforce thus developing and establishing a competitive
edge by leveraging innovation and getting closer to the pool of customers.
AIG had made engagements and commitments and is targeting to have the number of
women in executive management positions in Australia reach the target of 40% by 2020 (IAG,
2017). However, the projected figure for countries in Asian territories is set at 30% within the
same stipulated timeframe. In 2016, it was reported that approximately more than 30% of roles
in senior management were filled by women across the group and accounted for 33% of
Australian and Kiwi based businesses (IAG, 2017).
IAG has played a key role in transforming and contributing to the development of
insurance sector Australia. The company’s strong organizational culture that promotes diversity
and inclusion for all has played a vital role in determining the success of the company.

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References
Chatterjee, S. & Daga, A., 2018. Insurance Australia Group Plans to Sell Troubled SE Asian
Businesses: Sources. [Online]
Available at: https://www.insurancejournal.com/news/international/2018/04/20/486911.htm
[Accessed 9 May 2018].
Fern Fort University, 2017. Insurance Australia Group Limited SWOT Analysis / Matrix.
[Online]
Available at: http://fernfortuniversity.com/term-papers/swot/nyse/4969-insurance-australia-
group-limited.php
[Accessed 9 May 2018].
IAG, 2012. In defence of the insurance industry. [Online]
Available at: https://www.iag.com.au/defence-insurance-industry
[Accessed 9 May 2018].
IAG, 2017. Diversity, inclusion and flexibility. [Online]
Available at: https://www.iag.com.au/careers/diversity-inclusion-and-flexibility
[Accessed 9 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 9 May 2018].
Insurance Australian Group Limited, 2018. Our history. [Online]
Available at: https://www.iag.com.au/about-us/who-we-are/our-history
[Accessed 9 May 2018].
Insurance News, 2015. Combined Insurance: critics say it’s tip of iceberg. [Online]
Available at: http://www.insurancenews.com.au/local/combined-insurance-critics-say-its-tip-of-
iceberg
[Accessed 9 May 2018].
John, D., 2008. IAG sidesteps critics with chairman's early exit plan. [Online]
Available at: https://www.canberratimes.com.au/business/iag-sidesteps-critics-with-chairmans-
early-exit-plan-20081111-5mly.html
[Accessed 9 May 2018].
Reuters, T., 2018. Insurance Australia Group cuts catastrophe reinsurance coverage. [Online]
Available at: http://www.businessinsurance.com/article/20180103/NEWS06/912318229/
Insurance-Australia-Group-cuts-catastrophe-reinsurance-coverage
[Accessed 9 May 2018].
Witcomb, G., 2013. IAG buys Wesfarmers' insurance arm. [Online]
Available at: https://www.investsmart.com.au/recommendations/iag-buys-wesfarmersand039-
insurance-arm/60081
[Accessed 9 May 2018].

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Witcomb, G., 2017. Which is Australia's best insurer?. [Online]
Available at: https://www.investsmart.com.au/recommendations/which-is-australias-best-
insurer/139109
[Accessed 9 March 2018].