The head of a 100-year-old insurance-banking company defended a controversial “financial marketplace” strategy as he warned the group that change is needed to avoid the same fate as corporate dinosaurs such as Kodak.
Suncorp's new plan, the
Suncorp Marketplace, is likened to an iTunes store of financial services – a one-stop shop where customers can use an app to do things like check personal finances. At the firm's annual general meeting last week,
Suncorp revealed how it would spend the $100 million it earmarked to accelerate the marketplace idea.
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“I'd like to make sure that ... [Suncorp] continues to be a sustainable operation,”
Michael Cameron, Suncorp CEO and managing director, told The Courier-Mail. “But if all we do is to compete on price, in an environment where our products and services are very commoditised, then it really does put at risk that we will join the long list of companies that disappear because they failed to embrace technology and innovation and shift the model.”
This list include Borders, Blockbuster, and “the great Kodak story, where had they realised that they were in the business of capturing memories instead of selling film, these days they might have been called Instagram,” he said.
“So we just cannot continue to do what we are doing,” Cameron said. “Now — it’s not something that’s going to happen next year, but over time, we believe, that the sustainability of the business, in a traditional business model, is at risk as we progress forward.”
A number of finance-sector veterans – including rivals – were sceptical, worried that the idea is just another version of the cross-selling model that Suncorp unsuccessfully tried in the 2000s – a notion rejected by Cameron, although he admitted to receiving occasional feedback of that nature.
“I think that is typically from a person who really hasn’t grasped the concept of a platform and the new technology,” Cameron told the publication.
The Suncorp boss cited as an example USAA, a $30-billion insurance-banking company in the US, whose digital platform allows people looking to buy a car, for instance, to search for a vehicle as well as for financing and insurance options.
Morgan Stanley analysts said that USAA's experience showed the potential of Suncorp's strategy. Getting it right, however, was the challenge.
“USAA has among the highest net promoter score (a key measure of whether customers talk up a company) of any US company and … its customer retention is 98%,” the firm said.
But while the analysts attributed USAA's success to its dedication to the military and trust with members, they said Suncorp faces execution risks and would likely need to offer discounts to get people to take up its new model,
The Courier-Mail reported.
Cameron dispelled criticisms that the change will dilute Suncorp's identity from its core of being a banking and insurance company. He said the company would retain a core, and would transition from “being the supermarket that just sells their own brand to selling a whole branch of other brands as well.”
The digital idea is still being developed, but Suncorp said the two trial stores are already showing early success, with insurance sales more than doubling and monthly numbers for home lending up almost 30% on average, the report said.
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