Australia’s general insurers are warning that the sheer weight of regulatory compliance is now costing the industry up to 3.5 billion dollars annually and directly contributing to higher premiums, according to a detailed new report from the Insurance Council of Australia (ICA).
The 46-page report, The Cost of Regulatory Burden, quantifies for the first time what the industry describes as a “compounding and unsustainable” cost of meeting an expanding patchwork of federal and state regulatory obligations. It estimates that compliance and regulatory administration now account for between 8 and 10 per cent of total operating expenses across the sector — a figure that has nearly doubled since 2017.
The ICA report draws on data from member companies representing around 90 per cent of the market by premium volume. Collectively, insurers now spend up to a shocking $3.5 billion on compliance, reporting, and remediation related to regulatory change — a figure that excludes penalties, fines, or customer remediation payments.
For some large insurers, the cost of compliance programs now exceeds what they spend annually on technology innovation or claims processing infrastructure. One major insurer cited in the report said its annual spend on regulatory implementation and oversight had risen from $25 million in 2018 to more than $60 million in the 2023–24 financial year. Another estimated that a single round of ASIC breach-reporting changes cost more than $10 million to implement.
The report highlights the growing proportion of staff time consumed by compliance tasks: an average of 14 per cent of total full-time equivalent roles in insurance companies are now dedicated to regulatory or risk functions, up from 8 per cent five years ago.
Since 2017, insurers have been required to implement more than 30 major regulatory and legislative reforms, including the Design and Distribution Obligations (DDO), Financial Accountability Regime (FAR), ASIC’s new breach reporting framework, and multiple changes to APRA prudential standards.
While individually well-intentioned, the ICA says the cumulative effect has been duplication, inconsistent reporting requirements, and a constant state of transition.
“Each new framework adds to the legacy of overlapping compliance systems,” the report notes. “In many cases, insurers are maintaining multiple data and reporting mechanisms that capture similar information for different regulators.”
The council says several reforms have forced insurers to run parallel processes for years, while awaiting technical guidance or alignment between agencies. For example, one insurer reported spending $7 million on system changes for the Consumer Data Right, only to find the program’s insurance phase delayed indefinitely.
The ICA estimates that every one per cent increase in regulatory costs adds approximately $100 million in annual expenses to the sector, ultimately passed on to policyholders through higher premiums.
It notes that this burden compounds existing inflationary pressures from reinsurance costs, catastrophe losses, and global capital constraints. In a submission cited in the report, one insurer said that “regulatory complexity is fast becoming a bigger driver of premium increases than weather events for some product lines.”
Andrew Hall, chief executive of the ICA, said the issue was not with oversight itself but with duplication and pace. “We’re not calling for less regulation,” the report quotes him as saying. “We’re calling for better regulation — reforms that are coordinated, proportionate, and properly assessed for their cumulative impact.”
The report recommends the establishment of a “Regulatory Impact Coordination Framework” to measure cumulative costs before new rules are introduced. It also proposes that regulators conduct post-implementation reviews every three years to assess effectiveness and remove outdated or overlapping requirements.
Among the ICA’s more technical suggestions are:
Insurers told the ICA that continual reform cycles have also distorted hiring priorities. Several major underwriters said they now employ more lawyers, compliance officers, and data auditors than product designers or pricing analysts.
One mid-tier insurer told the council that “our innovation budget is now effectively our compliance budget — if we want to launch a product, we first have to fund the next regulatory change project.”
Another reported that since 2019, its total headcount devoted to compliance has risen 62 per cent, while staff numbers in claims and customer experience have stayed flat.
The ICA warns that without reform, the growing regulatory load could shave up to 0.2 per cent off the insurance industry’s annual productivity growth. It also raises concerns about “policy fatigue” among insurers and brokers who must interpret and operationalise complex rule changes at high frequency.
For mortgage and financial services intermediaries, this has downstream effects: delayed approvals, slower innovation in product design, and reduced flexibility for small businesses seeking cover.
“The industry is not arguing against consumer protection,” Hall said. “But when compliance consumes resources that would otherwise go to pricing, claims service, or risk prevention, customers ultimately pay twice — once through higher premiums and again through reduced service.”
The ICA concludes that while regulation remains vital to consumer trust, the current structure is too fragmented to sustain affordability and innovation. It urges a reset — not deregulation, but coordination.
“Insurers are ready to invest in resilience, technology, and customer service,” the report states. “But to do so, the regulatory environment must enable that investment rather than absorb it.”
The report’s findings are expected to inform the ICA’s pre-Budget submission to Treasury, where it will argue for a more cost-aware, data-driven approach to future financial sector reform — one that protects consumers without pricing them out of essential cover.
The Insurance Council of Australia’s report The Cost of Regulatory Burden outlines that insurers in Australia must navigate an extensive, multi-layered regulatory system spanning federal, state, and international requirements.
At the federal level, insurers are primarily regulated by several national agencies:
At the state and territory level, insurers face additional layers of compliance, including:
Finally, at the international and cross-border level, global insurers operating in Australia must also comply with:
The ICA report argues that while each level of regulation serves a legitimate purpose, the cumulative effect of overlapping obligations across APRA, ASIC, AUSTRAC, Treasury, and state regulators has created duplication and inefficiencies. Many insurers must maintain separate systems and reporting processes to satisfy different agencies — a structure the report says is “fragmented, complex, and increasingly unsustainable.”
