How AI Can Make Insurance More Affordable and Responsive for Australians

AI Report by Insurance Council and CSIRO Targets Key Industry Challenges

Australia’s national science agency CSIRO and the Insurance Council of Australia (ICA) have released a new report on the role of artificial intelligence (AI) in improving the insurance sector. Titled “AI for Better Insurance: Enhancing Customer Outcomes amid Industry Challenges,” the report addresses how AI can help insurers tackle rising costs, natural disaster risks, and evolving customer expectations.

With around one in three Australian homes exposed to bushfire risk and one in 12 to flood risk, the insurance industry faces growing pressure. Inflation, labour shortages, and increased reinsurance costs have driven up premiums and claims. Claims linked to catastrophic events have surged by nearly 50% over five years, with a projected 5% annual increase until 2050. These challenges hit hardest for households in high-risk areas and those managing tight budgets.

AI’s Potential to Improve Affordability and Service

CSIRO project lead Dr Alexandra Bratanova points out the urgency for the insurance sector to find new solutions. “The sector faces mounting pressures from climate change, rising expenses, and changing customer needs,” she says. “Our research identifies seven focus areas to guide responsible AI adoption that can improve affordability, customer service, and industry resilience.”

AI can streamline operations and tailor customer experiences, potentially making insurance more accessible and responsive. However, Dr Bratanova stresses the need for strong governance to protect privacy and ensure fairness. Responsible AI adoption is critical to avoid bias and safeguard consumer trust.

Priority AI Applications for Insurers

The report outlines five priority AI use cases for the Australian insurance industry:

• Automated claims processing
• Fraud detection
• Enhanced underwriting
• Natural disaster impact prediction
• Operational compliance

ICA CEO Andrew Hall highlights the importance of this research as insurers begin integrating AI into their operations. “This report offers a practical roadmap for adopting AI responsibly while focusing on customer outcomes,” Hall says. “Effective AI implementation can help reduce costs, improve disaster response, and make financial protection more accessible for Australians.”

The industry is committed to addressing privacy, safety, and bias concerns, ensuring AI benefits all customers fairly.

Seven Key Areas for AI Adoption

• Delivering better insurance products through AI-driven solutions
• Strengthening governance for responsible AI use
• Fostering collaboration and resilience across the industry
• Strategic and proactive AI adoption
• Building AI skills for a future-ready workforce
• Becoming a trusted partner through transparent AI practices
• Innovating insurance products to meet emerging challenges

The research, conducted with the ICA AI Working Group, draws on global best practices and frameworks for responsible AI adoption. For insurance professionals looking to build AI expertise, resources like Complete AI Training’s courses for insurance roles can offer valuable guidance on applying AI effectively and ethically.