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Suncorp warns blocked bank sale would hit innovation, tech upgrades

Suncorp says insurance product innovation, a multi-year technology strategy and benefits that could ease pricing pressures could be undermined if the proposed sale of its banking division to ANZ is blocked by the regulators. 

An appeal submission to the Australian Competition Tribunal stresses the public benefits from becoming a pureplay insurer would be lost if ANZ’s acquisition of the division doesn’t go ahead, given an alternative scenario involving a deal with Bendigo and Adelaide Bank is unlikely.

“With the acquisition, SGL will become a pureplay insurer, enabling more efficient operation of its insurance business, lower premiums, improved resilience and greater innovation to meet emerging challenges in insurance markets,” Suncorp says.

The Australian Competition Tribunal will begin hearing applications by ANZ and Suncorp on Monday December 4. Nine days of hearings have been scheduled before the Deputy President, Justice John Halley, concluding on Friday, December 15.

Suncorp in September said it expected a decision by the end of February and continued to expect the transaction could be completed around the middle of next year.

The Australian Competition and Consumer Commission blocked the planned $4.9 billion sale in August, raising a number of banking market concerns. ANZ and Suncorp have both lodged appeal submissions.

Suncorp’s submission says a streamlined management focus on insurance, and simplification of demands on group capital will diminish the need for the company to compromise investment spend in insurance.

A multi-year technology transformation strategy that will improve insurance customer outcomes couldn’t be done to the same extent if it has to trade-off the investments against the bank’s requirements, it says. 

“Secondly, a singular focus on insurance will materially improve the quality of SGL’s products and alleviate price pressures which current trends in insurance markets (rising reinsurance costs, diminished appetite among reinsurers for exposure to antipodean climate risks, and increasing claims frequency and severity in consequence of climate trends) are likely to generate,” it says.

The submission points to the creation of the Federal Government’s Cyclone Reinsurance Pool in arguing that strengthening Suncorp’s insurance business will reduce the risk of recourse to the taxpayer as the “insurer” of last resort”.

The pureplay insurer would also be better-placed than the insurance segment of a conglomerate to achieve innovation in insurance, it says. The submission highlights an Aon global survey that has pointed out insurance gaps in areas such as cyber, pandemics, supply chain failures and climate risks.

“Increased competitive strength and innovation by a major Australian insurer will contribute to solving emerging problems of under-insurance, particularly in relation to climate risks and is a public benefit,” it says.