Corporate Governance, Financial Stability and Evolving Insurtech: The Case of Insurance Australia Group (2011-2016)

Abstract

Like many multinationals, Insurance Australia Group (IAG) has had to adapt to challenges posed by insurtech, changing consumer behavior and financial markets in Asia, Australia and New Zealand. This article explains some of the corporate governance and financial stability problems and sub-optimal decision-making at IAG. The article also discusses how insurtech has evolved at IAG and some of its effects and limitations. IAG seemed to have intentionally engaged in asset quality management and earnings management which was intertwined with its overall strategy. Interestingly, despite all of IAG's problems, Berkshire Hathaway invested in $388 million in IAG in June 2015 for a 3.7 percent stake with the objective of reducing IAG's capital requirements.

Keywords: Corporate Governance; Fintech; Financial Stability; Systemic Risk; Insolvency; Enterprise Risk; Earnings Management; Asset-Quality Management