Our approach to reporting

We aim to ensure that the content of our reporting presents the information our stakeholders consider to be relevant and material to our business.

The readers of this sustainability report represent a range of stakeholders, from individuals to businesses and community groups. We recognise that not all of our stakeholders will use this report. Consequently, we engage with our stakeholders in many different ways, on an on-going basis throughout the year. Details on who our stakeholders are, and how we engage with them, are included on this website. Operating in a devolved model also means that there will be some topics that are relevant at a divisional level that are not considered material at a Group level. In this report, we will focus on Group level topics and aim to share both Group and divisional perspectives as relevant.

To ensure that we address the relevant topics, each of our divisions is responsible for bringing forward the topics and opportunities that have been identified through the stakeholder engagement processes that impact them. Our governance mechanisms (for example, our risk management framework) help inform this process. Together with the stakeholder feedback we receive, we are able to gather a view of the key issues that matter to our stakeholders. Using these governance frameworks, we are also able to prioritise issues and opportunities, with responsibility and accountability assigned for the development of action plans and responses. Our response will depend on the specific issue, ranging from us making a change to our strategy to responding directly to a stakeholder on a particular issue.

To ensure that we address the right issues in the right depth in our sustainability report, we prioritise issues based on an assessment of the importance to stakeholders and business impact. The importance to stakeholders considers the level of interest or concern in the topic. Business impact considers the topic in the context of our financial performance, our strategy, the extent of regulations and those topics that have been identified by our peers and industry groups.

Holding ourselves accountable

Stakeholder engagement remains a strategic priority in our corporate strategy. We are committed to the AA1000 AccountAbility Principles and for the fourth year running we have chosen to have our alignment to these principles assured against the AA1000 AccountAbility Principles Standard (AA1000 APS), which considers inclusivity, materiality and responsiveness with regard to stakeholder engagement. The standard holds companies to account for their management, performance and reporting of issues. It also ensures that we report transparently on the impacts of our operations, decisions, actions, products and performance. Importantly, the standard asks companies to engage with stakeholders and be accountable to them. For IAG, this means proactively engaging with those key stakeholders that we have an impact on and who affect us, on issues that are of importance to both us and them, and being flexible in the way we respond.

While IAG is broadly aligned with the principles of AA1000 APS, there are opportunities for improvement to ensure that the principles are consistently applied across our devolved operating model. Currently;

• There is a challenge in ensuring that key stakeholder feedback is captured and fed through the appropriate internal channels;



• Responsibility for stakeholder engagement processes has been devolved however, we do not have in place minimum standards for stakeholder engagement across the Group;



• Currently, we rely on internal channels of communication to ensure that any conflicts between stakeholders are identified and resolved. There is an opportunity to formalise and prioritise how we respond to conflicts between stakeholders; and



• IAG utilises a balanced scorecard approach that measures performance over key material issues. In the coming year and over the longer term, we will focus on better aligning the key performance metrics within this sustainability reporting process with those metrics included in the balanced scorecard.

We also continue to use the Global Reporting Initiative (GRI) (388kb .pdf) sustainability guidelines (including the financial services sector supplement) to inform our reporting. A GRI index that details the location of each of the standard disclosures can be found on this website. Our corporate strategy, Group performance during the year, key events and risks and opportunities identified through our Risk Management framework also inform our reporting.

Scope of this report

The 2011 'creating a sustainable business and community report' comprises the information on our website on the sustainability pages, together with an overview that is included in the IAG 2011 Annual Review. Further information about IAG is included on the 'About IAG' and 'Our business' sections of this website. The report outlines our approach to developing a sustainable business, goals and performance for the year to 30 June 2011 and includes qualitative and quantitative information. Quantitative information is provided for our Australian, New Zealand, United Kingdom and Thai businesses whilst qualitative commentary is provided for all of our operations, including joint ventures, as appropriate.

Assurance

• Insurance Australia Group Limited's (IAG) description of its alignment with AccountAbility Principles Standard (AA1000APS) as presented on IAG's website on the "About this report" page under the section "Business Sustainability" for the year ended 30 June 2011; and



• sustainability indicators as presented on IAG's website in the "Data Summary" table under the section "Business Sustainability" for the year ended 30 June 2011.