Meridian Lawyers has released an overview of key trends shaping insurance claims in Australia for 2025, focusing on the interplay between economic factors, regulatory changes, and evolving risks.
Principal Scott Kennedy and client engagement & strategy consultant Monique Purcell provided the analysis, drawing on industry data and recent policy developments.
The Australian insurance sector is experiencing upward pressure on premiums, attributed to a combination of severe weather events, inflation, and rising costs in construction and labour.
Government-imposed taxes, including stamp duty and other levies, continue to be a significant component of premium pricing.
According to the Insurance Council of Australia (ICA), state governments are projected to collect over $8.9 billion in insurance-related taxes for the 2024/2025 fiscal year, exceeding the combined profits of insurers, which stand at $7.2 billion.
In response to the increasing frequency and severity of natural disasters, the ICA has proposed a decade-long, $30.15 billion Flood Defence Fund. The initiative, intended to be co-funded by federal and state governments, aims to reduce flood risk in areas identified as highly vulnerable.
Meridian Lawyers noted recent figures indicating that there are 86 million general insurance policies active in Australia.
Since 2019, the cost of home repairs and rebuilding has increased by 29%, while building material expenses have risen by 30% since 2022.
Over the past five years, the total insured cost of extreme weather events has climbed by 67%. Approximately four million properties are considered at risk of flooding, and taxes now account for 20% to 40% of insurance premiums.
Market conditions have led to increased competition, with new entrants and smaller insurers growing their market share.
Legal interpretations have tended to favour policyholders in cases of ambiguous policy wording, and claims management processes are expected to be more transparent and timelier.
Key challenges in liability include a rise in claims involving contract and labour-hire workers, persistent sexual abuse and molestation cases, and new strata regulations in New South Wales effective from July 2025.
The presence of PFAS chemicals in imported products remains a concern for underwriters, despite bans on key types of these substances in Australia.
Emerging risks identified by Meridian Lawyers include the impact of severe weather events, the expansion of artificial intelligence and cyber threats, and the growing importance of Environmental, Social, and Governance (ESG) factors, which are contributing to new types of class actions.
The general insurance industry has undergone notable regulatory changes aimed at strengthening governance and risk management.
The Financial Accountability Regime (FAR), effective from March 2025, increases individual accountability for senior leaders in financial institutions.
The Australian Prudential Regulation Authority’ (APRA) Prudential Standard CPS 230, introduced in July 2025, requires insurers to enhance operational risk management, particularly in supply chain and claims handling.
Additional reforms include mandatory climate-related disclosures under the Australian Sustainability Reporting Standards (ASRS), efforts to standardise natural hazard terminology in policies, and ongoing reviews of life insurance premium practices by the Australian Securities and Investments Commission (ASIC) and APRA.
“Many of these reforms are driven by the need to protect consumers, improve fairness, and ensure products and services meet reasonable expectations,” Kennedy and Purcell said.
Mental health has become a leading cause of insurance claims, with the Council of Australian Life Insurers (CALI) reporting that nearly one-third of total permanent disability (TPD) claims are now attributed to mental health conditions.
In 2024, mental health-related payouts exceeded $2.2 billion, nearly double the amount paid five years earlier. Income protection claims due to mental health issues also reached more than $887 million in 2024.
The Productivity Commission estimates the broader economic cost of mental ill-health and suicide at up to $220 billion annually, reflecting the scale of the challenge for both insurers and the wider community.
Australian insurers are navigating a period marked by economic uncertainty, regulatory change, and emerging risks such as climate events and cyber threats.
“Slow economic growth, higher inflation, rising living costs, low productivity, and high interest rates are all contributing factors. Simultaneously, issues such as climate change, social inflation, AI, and cyber risks are creating further uncertainty,” Kennedy and Purcell said.
Meridian Lawyers said the adoption of advanced technologies, including artificial intelligence and predictive analytics, is expected to play a key role in helping insurers manage risk, streamline claims processes, and meet evolving customer expectations.
“To stay competitive, insurers must adapt to these changing risks while embracing new technology,” Kennedy and Purcell said.
