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IAG makes changes at the top to ramp up digital focus

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IAG announced today it is setting up a new division focused on strategy and innovation as the country’s leading personal lines insurer works to build a technological edge.

Julie Batch, who most recently ran the group’s Customer Labs division as Chief Customer Officer, will head the Strategy & Innovation division, taking up the role of Chief Strategy & Innovation Officer.

The new division “combines IAG’s existing strategy function” with Customer Labs, the insurer says in a statement to the Australian Securities Exchange. Customer Labs was created in 2015 to deepen the insurer’s customer insights through deployment of digital knowhow such as analytics and artificial intelligence.

IAG Group Executive Technology Neil Morgan will oversee an expanded Technology and Digital division, which will bring together the digital teams from Australia and New Zealand, including staff from Customer Labs and the existing Group Technology team.

CEO and MD Peter Harmer says the operating model changes are a “logical step” for IAG as the business builds on its core insurance portfolios and taps into adjacent opportunities.

“We continue to evolve our operating model to better align our customer and corporate strategies and further foster a culture of innovation as we consider and create new and different services for our customers,” Mr Harmer says in the statement.

An IAG spokesman told the aligned operating model will “ensure we have accountability in the right places across the business” and there will be “no major change to resources”.

Ms Batch and Mr Morgan will report directly to Mr Harmer when they formally take on their new roles on February 24. They are part of the Group Leadership Team that includes CEO Australia Mark Milliner, CEO New Zealand Craig Olsen and CFO Nick Hawkins.

Morningstar Analyst Nathan Zaia, who tracks the industry, told this morning’s announcement “simply reinforces the insurer’s focus on innovation and the digital offering”.

“The way customers engage with their insurer has obviously changed over the years, be it getting a quote or taking out a policy online at a time that is convenient for us, or even making a claim online,” he said.

“This is an opportunity for IAG to lower costs, but it’s also necessary to remain competitive against lower-cost online only players which are chipping away at their market share based on lower prices.

“Investment in data and analytics which helps the insurers price risks more efficiently will also likely be continual.”

In its 2018/19 annual report, IAG flagged the business will be stepping up its technology focus, encouraged by the results of Customer Labs since its creation in 2015.

“Investments made through Customer Labs over the last three years, in data, artificial intelligence and innovation have encouraged IAG to accelerate its spend on these technologies and the associated businesses it is developing,” the annual report says.

This financial year the business expects the amount by which expenditure exceeds revenue to expand and contribute to an increased pre-tax loss of up to $50 million in the fee income line, it says. In the previous financial year, the pre-tax loss was $9 million.

IAG will announce its first-half earnings results for the six months to December 31 next Wednesday.