IAG plans to make life insurance its next battleground with Suncorp

INSURANCE AUSTRALIA GROUP is attempting to take on its rival Suncorp by cross-selling life insurance alongside sales of its traditional car and home insurance policies.

By InvestSMART · 9 Oct 2012

By InvestSMART ·
9 Oct 2012

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INSURANCE AUSTRALIA GROUP is attempting to take on its rival Suncorp by cross-selling life insurance alongside sales of its traditional car and home insurance policies.

Insurers are trying to move into faster-growing financial services areas while sales growth from traditional car and home policies remains subdued.

IAG will repackage life insurance sold by a third party provider, TAL. Until last last year, TAL was known as Tower Australia. IAG will initially sell the life under its NRMA policy in NSW, before offering it in other states. In Victoria, an insurance venture with the motoring group RACV already sells life insurance policies.

The chief of direct insurance for IAG, Andy Cornish, said it made sense to move into life insurance sales as customers were demanding a broader range of insurance products. Life insurance in Australia is traditionally sold through superannuation funds, while financial planners sell the more complex products.

Suncorp, which sells insurance under the GIO and AAMI brands, already distributes life insurance through its own in-house life insurance arm.

Separately, analysts have speculated IAG could look to boost its stake in its Indian joint venture after a change to rules, allowing overseas companies to increase their investment in domestic insurers.

India's federal cabinet has allowed foreign direct investment in insurance companies to increase from 26 per cent to 49 per cent. However the change still needs to be approved by the Indian parliament.

IAG has a 26 per cent stake in its Indian insurance joint venture with State Bank of India. IAG executives have previously said they would be open to increasing the stake if ownership limits were increased. IAG initially invested $100 million.

A Deutsche Bank analyst, Kieren Chidgey, said while the green light on the foreign investment rule changes from the Indian cabinet was positive, there was still some way to go, because opposition parties generally appeared to be against the proposal.

Even so, Mr Chidgey said IAG was likely to build up its capital, rather than undertake special dividends or share buybacks, to give it the financial firepower to boost its stake if the opportunity arose.

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Frequently Asked Questions about this Article…

What is IAG's plan for selling life insurance and why is the insurer doing this?

IAG plans to cross-sell life insurance alongside its car and home policies by repackaging life cover provided by third-party insurer TAL. The move responds to customer demand for a broader range of insurance products and reflects insurers' efforts to move into faster‑growing financial services areas as traditional car and home policy growth remains subdued.

How will IAG distribute the new life insurance product and where will it launch first?

IAG will initially sell the repackaged TAL life insurance under its NRMA policy in New South Wales, with plans to offer it in other states later. In Victoria, IAG already participates in a venture with the motoring group RACV that sells life insurance policies.

Who supplies the life insurance that IAG will repackage and sell?

The life insurance will be supplied by TAL (formerly known as Tower Australia until last year), with IAG repackaging that third‑party product for sale through its own channels.

How does IAG’s life insurance strategy compare with Suncorp’s offering?

Suncorp already distributes life insurance through its own in‑house life insurance arm and sells insurance under brands such as GIO and AAMI. IAG is entering the space by repackaging third‑party life cover, setting up a competitive battleground between the two groups.

What does this life insurance push mean for everyday investors in IAG or Suncorp?

For investors, both IAG and Suncorp expanding into life insurance signals a strategic effort to find higher‑growth revenue streams beyond car and home insurance. It could mean increased competition and potential earnings diversification for both groups, although immediate financial impacts will depend on execution and market response.

Could IAG increase its stake in its Indian insurance joint venture and what would enable that?

Possibly. India’s federal cabinet has approved raising foreign direct investment limits in insurance firms from 26% to 49%, but the change still needs parliamentary approval. IAG currently holds a 26% stake in its Indian joint venture with State Bank of India (after an initial US$100 million investment) and has said it would be open to increasing the stake if ownership limits were raised.

How likely is IAG to fund an increased Indian stake through dividends or buybacks?

According to Deutsche Bank analyst Kieren Chidgey cited in the article, IAG is more likely to build up its capital base rather than return money via special dividends or share buybacks if it wants the financial firepower to boost its stake in India.

How is life insurance usually sold in Australia and why does that matter for IAG’s strategy?

In Australia, life insurance is traditionally sold through superannuation funds, with financial planners handling more complex products. That established distribution pattern matters because IAG’s plan to sell life cover directly alongside car and home policies represents a push to reach customers through general insurance channels rather than relying solely on super funds or advisers.