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Besieged insurer IAG happy with NZ performance, potential

BUSINESSDESK: Insurance Australia Group, the company besieged by angry clients in Christchurch, has told shareholders it is happy with its strong operating performance, which will improve further in New Zealand.

IAG has fronted angry mobs in the city as residents, particularly those on unstable land after the earthquakes, have vented frustrations at the slowness of claims payments.

Some clients have been caught between the Earthquake Commission, which pays out the first $100,000 of earthquake claims and private insurance companies. IAG owns the NZI, State and AMI brands, giving it 55%  of the home and contents market and 60% of the motor insurance market in New Zealand.

Chief Executive Mike Wilkins told the annual meeting in Sydney yesterday that a highlight of the 2012 financial year was a significant increase in profitability in New Zealand and the momentum was expected to continue in 2013.

The company achieved an insurance margin of 10.4% in its New Zealand business in its 2012 financial year, up from 0.4% the previous year. It increased gross written premiums by 26.6% and expects further growth in 2013.

Further synergies from the integration of the AMI business are expected to improve earnings in 2013. It has previously said that AMI will generate at least $NZ30 million per annum in net synergies within two years.

A shareholder asked why the company had paid $A296 million for AMI when it had $A60m of net identifiable assets. The rest was "intangible and hot air".

He was told that AMI was a very, very good brand and the business would generate substantial value in terms of savings in the New Zealand market.

AMI brought half a million new customers to the company and its business was complementary to the existing State Insurance business IAG had in New Zealand.

Mr Wilkins told shareholders the company was pleased at how its business had met the needs of earthquake-affected customers in Christchurch and there had been sound progress in dealing with these claims.

It was a difficult situation in the city but at June 30 the company had paid $1.3 billion in claims.

Comments and questions
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IAG (Craig Dowling) responds. It is highly subjective at best to use the term 'besieged' and to refer to 'angry mobs' in this article. Such terminology does a disservice to the majority of people in Canterbury and those such as IAG working on the recovery. IAG is under the same pressure as everyone else to settle customer claims and is working hard and making progress. It is a strong insurance group determined to be a leader among insurers. As background and context to the headline, IAG representatives met with a group of less than 100 people for an hour or so on one day several months ago. That group included a range of interest groups including the Campaign Against Foreign Ownership of Aotearoa (just to put this in perspective). Many of the people in attendance were not customers of IAG brands. They were marching from another venue that we were near, so we weren't the primary focus. They were making a point, and IAG was happy to listen to their insurance concerns. Fewer than half a dozen people completed forms relating to specific issues they had. They were not a mob. A few were angry for sure but IAG was there to show respect for their views and provide information. IAG has been active trying to address very complex issues and also leading insurance discussions at CERA and community led public meetings. Fronting up is the approach we have taken, and intend to continue to take as we think it is an approach our customers appreciate - although not everyone is happy all the time.

Mr Dowling in his response fails to see the bigger picture that being they are part of an overall perception by all NZ'ers that the insurance industry in this country are nothing other than 'fair weather' friends probably worse. IAG and all their subsidiary labels are now branded by the lowest common denominator which is the odious, deceitful and incompetent Eqc. It matters not that IAG and others can spend thousands on PR and advertising telling us how wonderful they are, we all know better and as coming years pass where the fall out from experience both first hand and anecdotal will ensure kiwis shop around. The cases that will continue to appear in years to come on fair go and prime time news will only reinforce the contempt we hold for Insurers in general. Eqc set the benchmark, IAG can suffer in their jocks !

We have six residential insurance polies with IAG in CHCH.

All properties have multiple claims for building and land damage.

IAG have not responded to any of these claims and have not indicated when we can expect service.

In the meantime IAG are increasing premiums and margins.

I am angry and frustrated at the lack of support from a company that I have paid premiums to.

At the very least we would expect some communication in regards to the non EQC claims for paths, fences and land..

Not a peep.. in over two years, despite multiple claims on multiple properties.

Looking forward to changing providers with future purchases and leaving IAG once they settle our claims.

Well its taken me two years to realise that by continuing to pay my Insurance Premiums for the next 'God knows how long' while sitting in a written off House, that I would have paid closer to what they should be paying me or sorting for me yesterday year! Rogues playing God! Bending rules where fit!

Having been to many of the community meetings where IAG have tried to honestly discuss why the brand has failed the city, having an excellent case manager but zero progress as a TC3 property (and unlikely to have my home rebuild for another 1-4 years despite damage between 500-700k) I am sad that the Head of IAG can dismiss the issues in Christchurch so easily. An honest report would say we could have done better, and honest GM would acknowledge that many customers have been unhappy with their performance and would have a desire to do better not just push the profit made on the backs of customers whose needs have not and will not be met in a timely manner. The real bottom line is how the market feels about your product and right now IAG have a serious problem and a GM with his head in denial land.

I agree with Craig that the 'besieged by angry mobs' phrase, while picturesque, is not accurate. However IAG certain is being 'besieged by angry clients in Christchurch'. The problem is that even if IAG now makes a substantial progress on its promise to clear its Chch backlog, it has already suffered what is probably irreversible damage to its reputation within New Zealand. Since insurance companies live off customers belief in their reputation, IAG has to hope that the contagion from its Chch mess is very limited. If the bad press currently being generated in NZ continues for the next 3 or 4 yeras, as is likely, what will be left of its reputation by then?
The current increase in profit and market share recorded in its accounts for NZ has occurred due to it buying two major NZ companies, rather than growth of its brands. The purchases have left IAG with very little room for further growth in market share in NZ, and a lot of potential for decrease in market share. IAG needs to be investing a lot money rebuilding the faith of its Chch clients rather than looking for savings - talk about short-sighted management!
IAG NZ has a hard road ahead and could do without an Australian based CEO who insists on making vacuous statements which will only alienate its NZ client base further. Has Mike Wilkins even visited Christchurch to evaluate the progress IAG have promised?

I am one of thousands of pissed off State Christchurch customers trying to get action to rebuild my TC3 home. I have been a loyal State client for 50 years but now must predict that when the dust finally settles (probably in another 5 years) there will be a mass departure away from all NZ State insurance policies by all those previous clients who, like me, are sick of being lied to and treated like idiots . I have had no real progress on my claim with State and absolutely no end in sight .

Having been a loyal State client with property and vehicles for 45 years, I foolishly thought that I would be treated with some respect in these trying times. Instead I have been fobbed off with platitudes, so-called information which was available on the internet long before, then changing the goalposts several times. I will be lucky to resolve the problem with my house before needing a rest-home - perhaps that's their plan!

IAG - their claims service is an absolute waste of time. A lying and devious claims handler and IAG management in promising quick settlement (and that not then happening), misinterpretation of otherwise universally accepted policy interpretations et al. The list goes on. Our house was written off in the Sept 2010 quake, and subsequently filled with silt and liquefaction after Feb 2011. This resulted in us having to seek alternative accommodation as the property was declared unfit to live in. Now, two years down the line, and even with the use of a very good solicitor, IAG still havn't paid us a cent for the total loss of house and contents. The latest is that they are discounting our contents claim by approx 80%, due to age of goods and 'wear and tear. This is despite us having a 'new for old' policy. What planet are those incompetents on? Solicitors costs are mounting up; the longer it takes to get a settlement the more it will cost IAG as we shall be seeking interest on payments which should have already been paid under the policy, all legal costs and damages. As previous correspondents have alluded to, IAG and sister companies will not be getting any further business from a lot of people, including my family, nor probably from a lot of people in ChCh. Read the reports to see which companies, like Lumleys, are helping, not hindering, their policyholders. Finally, those adverts on the TV and in the press for the IAG group companies; they are an insult to everyone who is currently fighting IAG for a settlement, the lies that are being told in those adverts are just that; lies. It is apparent that IAG care not for us in New Zealand; it would be great if the spineless John Key, and his government, were to stop them from operating in this country, but that is unlikely to be the case given that it was him who recently sold AMI to the foreigners.

Pitty I have only read this article now... I came across it whilst trying to find out more information on IAG processes regarding my rebuilding in Christchurch. Would of been happy to turn up at the AGM meeting with a placard on asking when they will rebuild my house so I can move home to Christchurch.... I would be one of the many IAG customers not making sound progress, or really any progress, contrary to Mike Wilkins claim to his shareholders.