A shock announcement by Australia’s second largest insurance company IAG (owners of CGU, Swan Insurances and NRMA Insurance) that it will downgrade it’s profit expectations for 2010 will have an impact on its Australian customers.

Costs of $365 million for its IAG UK operation have added to losses following the Melbourne and Perth hailstorms earlier this year. This will reduce IAG’s profits down to about 6%, down from the previously expected 13%.

As a result IAG have announced that they will be recruiting “experienced individuals” in underwriting (i.e. risk selection) and actuarial (i.e. pricing) roles…better late than never..However, this also means that IAG will pass on rate increases in the order of 3-5% to its Australia customers in order to make up for the UK losses.