Australian insurers are increasingly looking to artificial intelligence (AI) as a tool to address the sector’s evolving challenges, according to a new report jointly released by CSIRO and the Insurance Council of Australia (ICA).
The report, “AI for Better Insurance: Enhancing Customer Outcomes amid Industry Challenges,” examines how AI could help insurers manage rising costs, natural disaster risks, and shifting customer expectations.
The report comes at a time when approximately one-third of Australian homes – about 5.6 million properties – are at some level of bushfire risk, and roughly one in 12, or 1.36 million homes, are exposed to flooding.
These hazards – combined with inflation, workforce shortages, and increased reinsurance expenses – have contributed to higher premiums and a surge in claims.
Catastrophic event-related claims have climbed nearly 50% over the past five years and are projected to rise by 5% annually through 2050.
The CSIRO-ICA report highlighted five main areas where AI could be applied within the insurance sector:
Recent research from Gallagher Bassett (GB) indicates that the use of generative AI in claims operations has grown significantly among Australian insurers.
According to GB’s “Carrier Perspective: 2025 Claims Insights” whitepaper, 88% of insurers in Australia now use generative AI in some aspect of claims handling, up 38 percentage points from the previous year.
The report also found that 64% of Australian insurers see improved decision-making through data analytics as a key advantage of AI, and 62% are using AI to identify fraudulent claims, a slightly higher proportion than the global average.
“The insurance sector is facing significant pressures from climate change, rising costs, and shifting customer demands," Dr. Alexandra Bratanova, who led the project for CSIRO. "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.”
She added that AI could help insurers operate more efficiently and deliver tailored experiences for customers, but stressed the need for robust governance.
“This transformation needs to be managed responsibly, with appropriate governance frameworks and guardrails to protect consumer privacy and ensure equitable outcomes,” Bratanova said.
“This report provides a practical roadmap for insurers to harness AI responsibly while keeping customer outcomes front and centre," said ICA CEO Andrew Hall. "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.”
While the adoption of AI is accelerating, industry-wide trust in the technology is still developing.
A Capgemini Research Institute study found that only a small fraction of insurers have fully implemented or trust AI agents, although most executives believe scaling up AI use would provide a competitive edge.
Consumer sentiment is also mixed. GlobalData’s 2024 Emerging Trends Insurance Consumer Survey found that most respondents believe AI can improve service efficiency and performance, but concerns remain about the maturity and reliability of the technology.
