The claims function is entering a period of intensified scrutiny, operational pressure and cultural recalibration. According to Sophie Devitt, principal in Barry Nilsson’s national insurance and health team, the next 12 months will demand both structural and human-centred change - driven largely by regulatory focus and real-world catastrophes.
“One of the most significant areas of regulatory focus impacting claims functions is the evolving expectation around the identification and treatment of vulnerable customers,” she told IB. “Vulnerability is not a fixed characteristic. It can be situational and dynamic, and anyone can experience vulnerability at different points in time.”
It’s this shift that has fundamentally changed how claims teams must operate. No longer can vulnerability be treated as an exception, instead it must be assumed as a possibility in every interaction.
“In a claims context, this is particularly relevant where customers are dealing with highly stressful events such as displacement from their home following a natural disaster or significant financial loss,” added Devitt. “Even where a customer does not present with traditional indicators of vulnerability, the claims process itself can create or exacerbate vulnerability, requiring a more tailored and empathetic response.
“Alongside this, ASIC’s recent enforcement posture in relation to claims handling following extreme weather events is having a very real operational impact.”
This scrutiny is not theoretical, it’s going further in exposing tangible weaknesses. ASIC’s review of home insurance claims and subsequent communications to insurers have highlighted persistent issues around delays, communication failures, resourcing constraints and the treatment of vulnerable customers during catastrophe responses. And these challenges are only further compounded by scale.
“This scrutiny is occurring against the backdrop of increasing claim volumes from severe weather and flooding events, placing pressure on insurers’ ability to scale quickly and consistently,” added Devitt. “From a legal perspective, flood claims continue to attract attention, including the application of long standing principles such as the Wayne Tank principle. While well established, its use (particularly following large scale flood events) reinforces the need for careful analysis of causation, clear policy interpretation and robust decision making processes that can withstand regulatory and public scrutiny.”
A key challenge for claims teams in 2026 is bridging that tricky gap between regulatory expectations and the practical realities of day-to-day claims handling, particularly in high volume or catastrophe environments. And the disconnect often lies between intent and execution. As Devitt told IB, regulators rightly focus on outcomes for customers, but achieving those outcomes requires systems and workflows that are designed with both the customer and frontline claims professionals in mind. Here technology is frequently positioned as the solution, but it’s not without risk.
“Automation and technology have an important role to play, particularly in removing repetitive or administrative tasks that do not require human judgement,” added Devitt. “When implemented well, this allows claims professionals to focus their energy on the human aspects of a claim, including supporting customers, exercising discretion and identifying vulnerability. However, issues can arise where technology solutions are rolled out without sufficient consultation with frontline teams, leading to unintended bottlenecks or processes that do not reflect how claims are handled in practice.
“Resourcing constraints remain another significant barrier. Claims teams are operating in an environment of increasing claim complexity, heightened regulatory scrutiny and ongoing workforce capacity challenge. The pace and volume of work can make it difficult to consistently embed new regulatory expectations into decision making, particularly where training and change management are under resourced.”
In this environment, leadership becomes a critical differentiator. It is not enough to set expectations - leaders must actively shape the conditions that allow teams to meet them. As Devitt told IB, strong leadership is essential in helping claims teams navigate heightened regulatory scrutiny, and it starts with culture and education.
“A culture of service, where supporting the customer through the claims journey is central, provides the foundation for meeting regulatory obligations. With less margin for error, teams need to clearly understand the key thresholds, timeframes and behavioural expectations that demonstrate compliance in practice," he said.
As Devitt went on to tell IB, education is critical, not only in understanding regulatory requirements, but in helping people see how their individual role and day to day decisions contribute to compliance outcomes.
“Claims professionals need to be equipped to recognise vulnerability, manage highly emotional customer interactions and understand when and how to escalate matters. This also extends to leadership’s responsibility to consider psychosocial risks within the workplace, particularly given the emotionally demanding nature of claims work.
“Creating an environment where escalation is encouraged and supported is another important leadership function. People need to feel safe raising concerns or uncertainties early, rather than feeling pressure to “push through” complex decisions without support.
“Finally, leaders cannot underestimate the emotional impact on claims teams of broader public and media criticism of the insurance industry. Supporting teams to remain proud of the work they do, particularly in difficult circumstances, is critical to maintaining engagement, resilience and high standards of service.”
Amid these challenges, industry collaboration is emerging as a key lever for progress – which is why Devitt will be speaking at IB’s upcoming Claims Leaders Summit.
“Events like the Claims Leaders Summit play a vital role in bringing the industry together to address shared challenges and responsibilities,” added Devitt. “Claims functions sit at the intersection of customer experience, regulatory compliance and operational resilience, and getting this balance right is critical for the industry.
“This Summit provides an opportunity to engage in meaningful discussion about emerging risks, evolving regulatory expectations and practical solutions to common issues such as workforce capacity, technology integration and catastrophe preparedness. Importantly, it also allows claims leaders to learn from each other and share insights on what is working well, where challenges remain, and how approaches are adapting in response to increasing claim complexity and scrutiny.”
Ultimately, the stakes extend beyond operational performance to the broader reputation of the industry. As Devitt told IB, from a broader perspective, events like IB’s Claims Leaders Summit contribute to rebuilding and maintaining trust in insurance.
“By openly engaging with issues such as vulnerable customer support, natural disaster response and transparency in claims handling, the industry can collectively lift standards and improve outcomes for customers,” said Devitt.
Don’t miss out on your chance to network with industry leaders – register for IB’s Claims Leaders Summit here.
This article was created in partnership with Barry Nilsson.
