The Insurance Australia Group Ltd (ASX: IAG) share price is having a rough year, but the same can't be said for its major competitor.
While the IAG share price has slumped 9% since the start of 2021, that of QBE Insurance Group Ltd (ASX:QBE) has gained 32%.
That's despite what seems to be the major catalyst of IAG's tumble having hit both insurance giants.
At the closing bell on Friday, the IAG share price was $4.27, up 0.23%.
For context, the S&P/ASX 200 Index (ASX: XJO) increased 0.44% today and is up 11% over 2021 so far.
Let's take a look at why IAG has been underperforming its fellow insurance provider lately.
What's weighed on the IAG share price in 2021?
Looking back to late 2020, both IAG and QBE were caught up in the headlines when the New South Wales Court of Appeal found insurers must pay out business interruption insurance claims for losses caused by COVID-19.
Interestingly, while QBE sat quietly following the ruling, IAG halted its share price as it underwent a $750 million capital raise. The extra funds were needed to strengthen its balance sheet in the face of impending payouts.
As a result, QBE sailed out of the findings relatively unscathed. Meanwhile, IAG is now expecting to be hit with a class action regarding its disclosure of information of the case.
A law firm representing IAG shareholders expects to file the class action in the Supreme Court of Victoria in the new year. It claims IAG failed to communicate the likelihood the New South Wales Court of Appeal would find in favour of policyholders.
Fortunately (or unfortunately), IAG will be well versed in the courtroom by then. Legal action against the company was brought about by the Australian Securities and Investments Commission (ASIC) in October.
ASIC claims the insurer increased NRMA customers' premiums before applying loyalty and 'no claim' discounts. It alleges this cost at least 596,000 policyholders more than $60 million in total.
Not to mention, IAG recently downgraded its guidance for financial year 2022 after wild weather thrashed parts of Australia in October.
While all this weighed on the IAG share price in 2021, QBE's stock continued to trend upwards.
Sadly, brokers are predicting more pain for IAG in 2022. Meanwhile, experts are bullish on the future of QBE's shares.
