Insurance Of A Different Kind

Sydney Morning Herald

Saturday August 28, 2004

Jonathan Pearlman.

Michael Hawker's IAG is finding its wealth of insurance claims data has many uses, writes Jonathan Pearlman.

Kindness may colour his shrewdness, but Michael Hawker's efforts to find jobs for the homeless or research climate change are not noble stabs at benevolence. They are, he says, good for business.

As head of Australia's largest insurance company, Insurance Australia Group, his formula is simple: preventing crime or weather-related disasters will limit payouts and allow his company to reduce its premiums.

By taking a long-term view of its risk, the company can search for varied and inventive ways in which social benefits will flow on financially.

"It's a challenge for a company to think about how we find those things which we think are beneficial to the community and where we can also make a turnover," he says.

While his company is not in the business of charity, Hawker believes its survival and the strength of its reputation depend on identifying this crossover between economic and social benefit.

"It's is a matter of finding your alignment of what is an economically sustainable outcome and a community sustainable outcome," he says.

"People who are thinking about these issues run a better business. If you're not paying attention to how you utilise resources, people, suppliers, regulations, you're not really trying to optimise the long-term return of your company."

Using its information on claims and payouts, IAG identified areas with high-crime rates and worked with councils, police and community leaders to address the causes of crime. In areas such as South Sydney, Shelharbour and Dubbo, funding community drop-in centres and employment programs has helped reduce rates of car theft and break-ins by up to

30 per cent.

"In Shellharbour, we found we have a lot of burnt-out cars down there," Hawker says. "There's not much public infrastructure in terms of transport. So people steal cars and go somewhere and burn it out.

"We've been involved in providing seed capital for people to find employment in regional farms and industry and shelter for people who are homeless. These initiatives are having a tangible effect on reducing the crime rate, so the claim costs are going down.

?So you try to find out what the root cause of that is and then try to do something about it. It might be a lack of public transport, it might be an indigenous education shortcoming, it might be a drug and alcohol addiction issue, it could be a gambling problem.?

IAG has also worked with the Bureau of Meteorology to investigate storm damage and helped form the Australian Climate Group, which advocates and researches reductions in greenhouse gas emissions.

?I think people said 20 years ago, don?t worry about the future, just worry about today. I think that?s the wrong way of thinking about it and the community is saying we?re not going to allow you to do that.?

© 2004 Sydney Morning Herald

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