An industry source has told Insurance Business that, apart from the restructure to Insurance Australia Group’s (IAG’s) executive structure already announced in May, there are no current group structural changes happening. The source confirmed that a “small number of redundancies” will result from “repointing” functions to improve efficiencies in the separate intermediated and direct insurance divisions.
In a member update on its website, the Finance Sector Union (FSU) put the number of IAG jobs at risk at 54. The source consulted by IB wouldn’t put an exact number on the losses but said they were “small”.
Reports in The Australian and Australian Financial Review have referred to the looming job losses as part of a restructure.
A restructure to IAG’s group executive was announced in May on the eve of the June departure of Tim Plant, IAG’s chief insurance & strategy officer. A company media release – that started by announcing the retirement of CFO Michelle McPherson – also revealed that Plant’s Group would be abolished with a restructure and consolidation of its functions under either the Risk or Finance Groups.
The industry source told IB that Plant “put in place” the division of IAG into separate direct insurance and intermediate insurance divisions and so his group had served its purpose.
The next step – and the cause of the job losses – the source said, is part of CEO Nick Hawkins’ plan to improve decision-making efficiencies and put decision makers together so IAG can be more focused on the customers it’s serving, either consumers or brokers.
Under the changes, instead of reporting to a broader group executive, some positions will report directly to an executive in either the direct insurance or intermediated insurance division. The source said some of these reporting changes are for positions that were already working entirely for one division or the other.
This “repointing”, said the source, has resulted in job losses that are still being worked through.
On Friday, in a member update posted on its website, the FSU referred to “proposed redundancies at IAG.” The FSU said 54 roles are “proposed to be made redundant,” 35 of them in the finance division. The FSU said it was holding a session on Monday evening to go through the proposed changes and discuss the impact on members and their businesses.
In a statement released to some media organisations last week, rather than job losses, an IAG spokesperson referred to “impacted employees” and “taking further steps to reduce complexity and to simplify our business operations.”
The spokesperson also referred to “consolidating certain corporate functions and moving some support services into our customer facing divisions” to allow “more efficient decision-making” and “to meet customer expectations.”
The spokesperson said “impacted employees” are currently being consulted.
“We understand this is a difficult time for those employees and supporting them through these changes is our priority,” said the spokesperson.
In February, when IAG announced its preliminary half yearly results, Hawkins referred to strong top-line growth but said “premium rates continue to increase in response to claims inflation and in anticipation of additional reinsurance and natural perils costs.”
During an Investor Day presentation last month, the leader of IAG’s intermediated business, Jarrod Hill, also said increasing the cost of premiums was a major reason for his division’s current profitability.
“As we move into FY24, top line growth will continue to be largely rate driven,” said the group executive of Intermediated Insurance Australia.
Hill referred to “multiple pricing increases” across his business this year and an ongoing “adjustment” of rates in response to cost pressures, many of those inflation driven.
IAG’s intermediated business expects to bring in $250 million in profits next year. However, Hill said “expense” remains an ongoing challenge but he said the firm is “driving improvement” through “discipline controls.”
The figure of $250 million profit, said Hill, is “our primary focus” and “our ticket to play before we can grow the business.” Beyond next year’s profit target, Hill mentioned future plans – called “horizons two and three” – to establish CGU as a “market leader in the broker space.”
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