Insurer IAG will cut 600 jobs across Australia and close some offices as part of a restructure of its CGU business.
A day after the insurance industry’s peak body declared NSW and Victoria’s big wet to be a catastrophe, IAG’s local subsidiary that sells intermediated products warned it would cut staff numbers.
CGU’s chief executive, Peter Harmer, said the insurer’s headcount would decline from 3,700 to 3,100 during a three-year overhaul of its operating model, most of which will be completed by December 31, 2012.
But CGU’s natural attrition rate is running at 13.5 per cent as 500 employees leave the company each year, allowing it to rely on the departures to lower headcount rather than mass redundancies, he said.
“The reduction in roles will occur in most parts of CGU and they will be spread across the country,” he told reporters.
CGU’s Melbourne-based head office will likely feel the brunt of the role reductions, and CGU has no plans to follow up with another round of job cuts in the future, he said.
Consultation with employees started on Friday, and until it concludes CGU cannot disclose how many of its 60 offices nationwide will be shut.
Many offices are manned three days a week by one or two employees, and will be merged into mobile local account management teams, Mr Harmer said.
Financial Services Union national secretary Leon Carter dismissed the insurer’s arguments that natural attrition can limit the impact of role reductions.
“IAG aren’t saying that we’ve got 600 workers-less worth of work to do,” he told AAP.
They’re saying they’re going to reduce their payroll bill by 600 (roles) and expect the people who stay behind to pick up the slack.”
He disputed IAG’s claim it had pro-actively consulted with the FSU, and called on banks and insurers to consult properly to identify alternative solutions to save jobs.
“They undertake a whole range of measures to protect their profitability – hike up insurance premiums.
“It’s about time companies like IAG did everything they can to protect the workforce… rather than continue to see them as some expendable commodity that gets punted out the door every time there’s a bit a pressure around profit.”
CGU is an intermediary-based insurer offering personal, small business and corporate insurance, plus workers compensation. It holds a 14 per cent market share.
It generated 31 per cent of IAG’s gross written premium revenue in the six months to December 31, 2011, and will deliver a double-digit profit margin in 2012/13.
Premium rates for personal insurance lines will rise by five to 10 per cent in 2011/12, driven by the costs of natural disasters and climbing reinsurance costs, Mr Harmer said.
But the natural peril events have not prompted the insurer’s restructure which comes four years into a five-year company turnaround plan.
Rather, the need to eliminate duplicate functions and processes, cut costs and centralise expertise drove the changes.
Eight claims systems will be rolled into one, and a simplified corporate structure will make it easier for brokers and agents to deal with CGU, Mr Harmer said.
The changes will initially save IAG about $25 million, pre-tax, in 2012/13, and deliver an annual saving of $65 million by the end of 2014/15.
But the cost of the restructure will be $75 million, pre-tax, of which $35 million will hit IAG’s results for the second half of 2011/12.
IAG’s shares gained nine cents, or 2.81 per cent, to $3.29.