Suncorp readies first rollout of new CAPE pricing engine

Suncorp expects a new pricing engine called CAPE to be in use across its home insurance portfolio before the end of the year.

Group CEO Steve Johnston unveiled CAPE at the company’s investor day back in May, positioning it as a “contemporary pricing engine” that “represents our largest investment in pricing and underwriting”.

He said in May that CAPE would replace an existing pricing engine called GIPE, which has been in place since 2003 and has “served [Suncorp] well”, but is showing its age.

“Technology has evolved and our current systems have limited flexibility,” Johnston said in May.

“For example, we know open-plan living is a key driver of average claim size. To add this as a rating factor in our current system has been a time consuming and costly exercise. 

“With CAPE, this removes the current limitations and will enable us to use real-time data, utilise a full customer view and in time, enable us to personalise products.”

At the group’s full year results today, Johnston provided further context on the move from GIPE to CAPE, as well as some commentary around the latter’s expected go-live.

“We are making good progress with the rollout of our new pricing engine,” he said.

“We expect the first deployment of CAPE across the home portfolio before the end of the year.”

Suncorp’s insurance product and portfolio CEO Lisa Harrison said that the company had “been using [CAPE] for the last couple of years … in an offline environment.”

Johnston said that he personally had “high hopes for CAPE”.

“It's just not me saying that,” he said.

“I talk to people embedded in our business who've been doing pricing and risk selection for many, many years and I can see the glimmer of excitement in their eyes around having this new technology and this new infrastructure available to us.

“It will significantly improve the sophistication of how we do price across the portfolio.”

Johnston said the move to CAPE was necessitated by GIPE slowly losing its advantages and market leadership.

“The introduction of GIPE, which was a leading pricing engine infrastructure at the time, created a very strong competitive advantage for us,” he said.

“It allowed us to price down to the individual home on the home portfolio and created a huge amount of data for us to be able to improve our risk selection and pricing. 

“I guess, over time, like any technology or any infrastructure, it's overtaken in the market. I think some of the more modern and contemporary pricing engines, particularly the CAPE pricing engine that we looked at first in 2015, have superseded what was a very good pricing engine in GIPE.”

Johnston added that Suncorp did not wish to “disavow or talk down the infrastructure that we had previously”.

“[CAPE is] just the next generation and the sophistication of pricing that some of our competitors already are utilising that we can now very much take off-the-shelf, a very de-risked environment, and implement,” he said.

Technology costs

Elsewhere in its full year results, Suncorp reported group operating expenses sat at $2.8 billion, up from $2.75 billion partly driven by a brief increase in spending on strategic initiatives and technology upgrades.

“The majority of spending this half has been on digital first experiences and revitalising growth in insurance,” Johnson said.

“Technology costs increased mostly in relation to the new telephony platform and increased cloud hosting costs from digitising the business.”

Over the year Suncorp said the bank grew its technology assets while “modernising the core banking and insurance technology platforms.”

The group also finalised its upgrade and replacement of its contact centre platform with Genesys Engage software, which will help it handle high volumes of incoming calls.  

“We have also rolled out a modern desktop and collaboration platform for all our people and continued to migrate technology services to the cloud, with more than 60 percent of our systems now hosted externally by market-leading cloud providers," Suncorp said.

“Work is also progressing well on modernising our core customer, analytics, AI and data platforms.”

Suncorp stated that “investing in automation and digitisation, there is a significant opportunity to substantially shift the number of simple insurance and banking transactions done manually.”

Some investment in the past year went into a digital tool called AAMI House that helps consumers understand home and contents insurance.

It also expanded its webchat capabilities to improve online claims lodgment and create new self-service options.

Suncorp reported a group net profit after tax of $1.03 billion, up 13.1 percent.