IAG's CGU expects to decide “very soon” whether to adjust personal lines commission rates to ease premium pressure on customers.

CEO of CGU and WFI Jarrod Hill, who runs the insurer’s Intermediated Insurance Australia business, says there is a focus on affordability in the broker space.

“You’re seeing ... underwriters, us and others, working with the brokers to adjust commission levels on home and motor, and a big part of that is consideration of the end customer and affordability issues, so there’s multiple ways we can address it,” Mr Hill told insuranceNEWS.com.au last week after the release of IAG’s first-half earnings.

“We’re in discussions with our key broking partners about where do we set those ... with a focus on affordability to customers ... We’re working through that, we haven’t finalised anything yet, but we will be very soon.”

Hollard has already reduced commissions for home and landlord products, and QBE for its home offerings sold via the Steadfast Client Trading Platform, effective from March 1.

As reported in December, the remuneration changes come as the homeowners/householders’ line continues to lose money despite sharp rate increases. Australian Prudential Regulation Authority data shows the line’s underwriting loss worsened to $205 million in the year to June 30, from $199 million a year earlier.

Mr Hill says IAG is focused on lifting efficiency, reducing running costs and “really trying to look at all ways to moderate that price going to the end customer”.

“How do we run our business? How do we invest to run a more efficient business so we are reducing our cost to run ... from an IAG perspective right across the business we’ve got a real keen focus on efficiency,” he told insuranceNEWS.com.au.

In the December half, Intermediated Insurance Australia’s insurance profit increased to $162 million from $49 million, driven by a higher underlying margin of 9.5%, up from 5.7%. Gross written premium grew 5.8% to $2.4 billion, including 3.1% growth in commercial short tail, with low double-digit average rate rises being offset by lower volumes.

Volume growth was achieved in agencies, but this was more than offset by reductions in country and business packages following specific rating and portfolio actions.

Personal lines GWP grew 22.8%, including about $100 million of premium associated with the new distribution partnership with ANZ for home, landlord and motor insurance products for the bank’s customers.

On the volume losses, Mr Hill says it is partly “by design”.

“Particularly for our CGU business, we do have a focus on delivering margins, so some of the volume loss is by design. There are areas where we are not able to deliver the margins with pricing that we can achieve in the market. So there has been volume drop there.”

He says “a little bit” of the SME portfolio has recorded volume loss, as has the personal lines business.

“But we did see a lot of growth, particularly in personal lines last year, [and] we’re seeing some uplift in our larger property business and we’re seeing some uplift in some workers’ comp.”

IAG says the intermediated business is on course to achieve its target of $250 million profit this financial year.

“Our intermediated business here in Australia continues to make solid progress,” CEO Nick Hawkins said last week. “We set a target of achieving insurance profit of $250 million by the end of this financial year. By reinvigorating our underperforming CGU and WFI part of our company, with Jarrod’s leadership and the team focusing on underwriting discipline, we’re confident of delivering at least a $250 million result this year.”