Suncorp will be able to invest in product innovation and redesign with a focus on catastrophe-hit areas. Credit: Kelly Sikkema on Unsplash.

Suncorp believes that by divesting its banking unit it will be able to focus on offering affordable insurance solutions, the Sydney Morning Herald reported citing CEO Steve Johnston.

The sale would allow the Australian financial services group to deploy capital, which otherwise would have been used to the boost banking unit, in the insurance business, Johnston said in a document filed with the competition authority. 

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In July 2022, Australia and New Zealand Banking Group (ANZ) and Suncorp signed a A$4.9bn ($3.97bn) deal for the sale of Suncorp Bank. 

As per the report, the deal, which is yet to secure approval from the Australian Competition and Consumer Commission (ACCC), is facing heightened regulatory and political scrutiny.

According to Johnston, the Australian insurance industry has been dealing with several issues, such as greater regulatory scrutiny, financial pressures related to the expenses of natural disasters, and volatile markets for reinsurance worldwide.

However, as a pure-play insurer, Suncorp will be “better positioned to advocate for government policy more focussed on risk mitigation strategies to deal with the impact of major weather events”, he said in a witness statement to the ACCC.

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Additionally, the business will be able to increase its investment in product innovation and redesign to lower the cost of insurance for customers, with a focus on regions that are more vulnerable to natural catastrophes.

“The current conglomerate structure is not optimal in seeking to achieve this growth and success given the medium to long-term macro trends facing both industries [banking and insurance],” Johnston noted.