Insurer feels brunt of UK claims

Equity Red Star parent company Insurance Australia Group has revealed worse-than-expected losses in the UK as it battles against soaring injury claims.

The Sydney-based group, which owns UK operations including the Equity Red Star Lloyd’s of London syndicate and specialist commercial insurers, said its British arm suffered a 121 million Australian dollar (£76 million) insurance loss in the six months to December 31.

It warned the hit would impact wider group half-year results, with net profits now expected to more than halve, while it also trimmed full year expectations as costs mount from the recent severe floods in Australia.

Insurance Australia Group (IAG) has struggled in the UK in recent years as the rise of “no win, no fee” claims handlers has sent injury cases rocketing.

IAG has increased rates by up to 20% across private motor books, with more “significant” rises to come as it steps up action to tackle UK losses.

However, the group was also impacted by an 11 million Australian dollar (£7 million) bill for winter claims in the UK after the severe December weather.

Mike Wilkins, IAG managing director and chief executive, said: “We have made progress during the period in remediating our operation in the UK, but I’m disappointed to report that bodily injury claim inflation has continued to affect the local industry, and has exceeded our previously held expectations.

“This, coupled with rate increases taking longer than anticipated to emerge in non-private motor classes, has contributed to a greater than expected loss for this business.”

The wider parent company, which is Australia’s biggest home and car insurer, also said it was facing around 300 million dollars (£188 million) so far in weather-related claims – largely due to the widespread damage caused by last month’s flood crisis in Queensland, northern New South Wales and Victoria.

IAG bought its first operation in the UK in 2006, when it acquired direct to consumer insurance firm Hastings Insurance Services.