The basic principle of insurance is simple. Premiums are paid to insurers to reduce the financial hardship of an unexpected loss.
While the principle may be simple, the mechanics of running an insurance company are not.
Insurers price products before their actual cost is known. That's made more difficult by the influence of long-term cycles outside our control. Weather patterns, investment returns, changing regulation, availability of capital and reinsurance, and shifting community attitudes towards risk, can all take years to manifest themselves. Insurers also deal with events that happen at a moment's notice, like the damage from a severe storm.
Although Insurance Australia Group deals in uncertainties, there is one thing we do know for sure. One in three households in Australia and New Zealand relies on us to protect them and their assets. It's a responsibility we take seriously, and one we believe requires us to deliver value in four ways:
- paying claims;
- understanding and pricing risk;
- managing our costs; and
- reducing risk in the community.
Aligning our people and our business around these four principles is the key to ensuring our future sustainability and creating value for our shareholders.
However, a risk management story can't be told over one year. That's why we've made this report the first instalment of an ongoing series. It's a new way of reporting, but one we trust will help you view the 12-month performance of a long-term investment.
Michael Hawker
CEO, Insurance Australia Group
James Strong
Chairman, Insurance Australia Group
