The insurance industry in Australia faces mounting challenges as it falls behind international counterparts in preparedness levels, according to the latest PwC Insurance Banana Skins Survey. The findings come at a time when Australian insurers are grappling with multiple simultaneous threats ranging from digital security concerns to regulatory pressures and affordability challenges.
The survey, in its 10th iteration, gathered input from 698 insurance executives across 42 territories internationally and 37 territories in Australia. The data encompasses perspectives from leaders at major general, life, and composite insurance organisations. Results indicated that Australian insurers scored 6.6% lower on the Preparedness Index compared to global industry counterparts. The Banana Skins Index, which measures industry perception of risks, decreased by 6% over two years, potentially indicating adaptation patterns or risk fatigue across the Australian market.
Digital security threats maintain the leading position among identified risks in Australia. However, technology concerns have moved into second place after climbing four positions since 2023. Most notably, artificial intelligence has emerged as a major concern, advancing from 11th place to third position in just two years.
Antonie Jagga, who leads PwC’s insurance operations in Australia, commented on the speed of these changes. “Risks related to cyber, technology, and AI are accelerating at a speed we haven’t seen before in the insurance industry. This is creating a preparedness gap that didn’t exist two years ago, and we are seeing that Australian insurers are feeling less prepared to manage these challenges compared to their global peers,” he said.
Jagga emphasised the trajectory of AI risk recognition. “Two years ago, AI wasn’t even in our top 10 risks. Today, it’s number three and climbing fast, but our research shows the sector’s preparedness is declining while global peers have improved. That gap is a red flag,” he said.
The PwC findings align with conclusions from the Aon plc 2025 Global Risk Management Survey, which included participation from nearly 3,000 executives responsible for risk management across 63 nations, including Australia and New Zealand. The Aon research similarly identified digital security breaches and cyberattacks as the primary threat to Australian enterprises. Survey data showed that 93% of Australian participants maintain structured approaches for assessing their digital security risk exposure.
Addressing the preparedness challenge requires Australian insurers to invest in developing skilled workforces in areas undergoing transformation through artificial intelligence, particularly in functions such as underwriting, pricing assessments, and claims management. Modernising technological infrastructure represents both a risk mitigation strategy and an opportunity for competitive advantage. Jagga said: “Modernising legacy systems and building resilient data and cyber systems enables faster quotes for customers, sharper risk ratings, and streamlined processing across underwriting and claims. What is important is that across this work humans remain at the helm, and the systems are continuously monitored as the technology evolves.”
However, executing this workforce strategy presents its own challenges within the Australian context. The very talent development that insurers require to address their preparedness gap faces headwinds from broader labour market constraints. The Aon survey identified risk dimensions particular to the Australian business environment. Challenges related to legal and regulatory frameworks remain significant, having occupied prominent positions in risk assessments for over two decades. Human resources considerations also rank prominently, with “inability to recruit or keep experienced professionals” and “labour shortages” appearing at sixth and ninth positions respectively in Australia’s risk rankings.
Political risk has climbed to fourth position among identified concerns, moving up four places from the 2023 survey. This shift reflects intensifying government attention directed toward the insurance sector, driven by concerns regarding premium increases and restricted coverage in regions vulnerable to cyclones and flooding. Global geopolitical tensions have also contributed to heightened political risk assessments among Australian insurers.
Jagga said the relationship between rising risks and consumer costs will remain central to industry discussions. “Affordability remains the defining theme going into 2026, and we’ve seen that translate into elevated political risk. Insurers need to demonstrate they’re using technology not just to manage their own risks, but to make cover more accessible and affordable for Australians, particularly in high-risk areas,” he said.
The industry can enhance affordability through implementation of data-driven pricing methodologies. “Affordability improves when pricing is smarter. Insurers can better align premiums to actual exposure rather than traditional methods, by using AI and richer risk data. Done well, this reduces underinsurance, keeps essential protections within reach in high-risk areas, and delivers better outcomes when Australians need to make a claim,” Jagga said.
