AI can help address some of the most pressing issues facing the Australian insurance sector and its customers and ensure that Australians are better insured according to a new report by the Commonwealth Scientific and Industrial Research Organisation (CSIRO) Australia's national science agency, and the Insurance Council of Australia (ICA).
The new 40-page report AI for Better Insurance: Enhancing Customer Outcomes amid Industry Challenges explores how AI can help insurers manage rising operational costs, natural disaster risks and changing customer needs and expectations.
A media release by ICA said, “Today, around one in three Australian properties – 5.6m homes – face some level of bushfire risk, while one in 12 properties – 1.36m homes – are exposed to flood risk.
“These risks, combined with inflation, labour shortages and higher reinsurance costs, have contributed to significant increases in insurance premiums and claims.”
Insurance claims related to catastrophic events have increased by nearly 50% in the past five years and are expected to grow by 5% annually until 2050. These pressures are felt across the community, particularly by households in high-risk areas and those managing cost of living challenges.
CSIRO project lead Dr Alexandra Bratanova said the critical timing of this research for Australia's insurance industry as the sector seeks new ways to deliver better value and protection for Australians.
“The insurance sector is facing significant pressures from climate change, rising costs, and shifting customer demands,” Dr Bratanova said.
“Our research identified seven key areas to guide the responsible adoption of AI in Australia's insurance sector, with the potential to improve affordability and customer service, and strengthen industry resilience.
ICA CEO Andrew Hall said this research was vital for the industry, as it embarks on a journey to embrace AI capabilities to better serve customers.
Mr Hall said, “By implementing AI solutions effectively, we can improve affordability and enhance our natural disaster response and recovery – ultimately helping more Australians access the financial protection they need.
“The industry is committed to prioritising safe adoption by addressing privacy and safety concerns, and AI system biases so that these technologies serve all Australians fairly.”
The report outlines seven key areas for advancing AI adoption in insurance:
- Delivering better insurance for all through AI-driven solutions
- Strengthening governance for responsible AI adoption
- Fostering collaboration and resilience across the industry
- Adopting AI strategically and proactively
- Building AI skills for a future-ready workforce
- Becoming a trusted partner through transparent AI
- Innovating insurance products to address emerging challenges