Australia’s insurance organisations face a perfect storm of tighter regulatory compliance requirements, increasing risk from more frequent and intense weather events, and pressure to upgrade legacy systems that cannot support the digital transformation programs required to modernise business operations.
For example, on the regulatory front, the Australian Prudential Regulation Authority is demanding more robust governance practices from insurers and other institutions to overcome areas of weakness, including treating requirements as ‘box ticking’ exercises. On climate, the Insurance Council of Australia points to a projected increase in the cost of climate-related extreme weather events to $35.2 billion per year by 2050. A recent CSIRO report notes that by 2030, one in 25 Australian homes could become uninsurable, limiting coverage in high‑risk areas and raising concerns for vulnerable groups.
AI is expected to generate $1.1 trillion in annual value for the global insurance industry through applications such as underwriting, claims processing, customer service automation and decision-making help. CEOs are already embracing the productivity opportunities presented by AI: surveys reveal 73% of insurance CEOs view GenAI as the most important investment opportunity. The potential value of AI-powered automation to drive efficiencies in the industry in Australia is underlined by the fact that insurers received more than $1.8 billion in claims from 148,000-plus incidents in the first half of 2025 alone.
Improving customer service and satisfaction
Insurance leaders recognise customer satisfaction is vital to continued success. A survey conducted by PwC revealed 80% of insurance CEOs had actively incorporated customer satisfaction metrics into their long term strategies.
These metrics included net promoter score, customer satisfaction score, first contact resolution rate, cross-channel consistency metrics, claim processing time, digital experience, customer retention and churn rate. AI is viewed as key to driving improvements across these areas.
For example, one Asia-headquartered insurance group used AI to transform customer experiences and promote better and healthier lifestyles.
After struggling to provide product packages and care that improved customer engagement and loyalty, the business opted to develop a super app to make interaction seamless.
Leveraging AI, optical character recognition and electronic know your customer technologies, the app supports a range of activities, including customer service, loyalty programs, awareness and research and quote and policy submission.
The result? Digital transformation of 96% of customer services, eliminating manual data entry and monitoring; resolution of more than 87% of customer inquiries in the first call, improving the customer experience; and over 9.2 million online registered customers, showcasing higher engagement and loyalty.
Enhancing claims handling
Achieving efficiencies in underwriting and claims handling is a key opportunity for insurance companies.
For example, in life insurance, handling claims is complex and typically requires the processing of patient records, invoices and other documents.
Performed manually, these processes can be time-consuming, expensive and inaccurate.
The involvement of third-party providers can also complicate the picture, compromising organisations’ ability to extract insights from data and up-sell or cross-sell to customers.
An AI-powered solution can transform policy underwriting and claims processing to deliver extensive efficiency benefits.
For example, one insurer has implemented a process whereby policy requests are submitted by an agent app and internal system. Optical character recognition technology extracts information from documents and AI assesses submissions to provide risk-based scores.
Passed requests are automatically issued and customers notified, while human inspectors come into the loop to examine unqualified policies.
This process, which combines AI with human judgement to ensure quality and compliance, can also be applied to claims adjudication.
The insurer has achieved a 23-percentage point increase in straight-through processing rate in underwriting and claim processing, reduced underwriting handling time from 20 minutes to two seconds, and increased underwriting efficiency by 600%.
Reducing fraud rates
Fraud is a critical issue for the insurance industry. Members of the Insurance Council of Australia detecting $560 million worth of cases of opportunistic fraud for motor and property in 2023 alone. Undetected fraud is estimated to cost the insurance industry around $400 million a year.
However, insurers are employing AI and machine learning to learn from historical data in order to generate confidence scores for fraud detection.
Research reveals contemporary AI-powered fraud detection systems achieve detection rates of up to 94%, while reducing false positives by 40-60%, compared to traditional rule-based methods.
AI-powered claims management, integrated with other insurance processes via a single platform, can deliver dramatic benefits.
One insurance company that took this approach reduced fraud-related losses by up to 15% and increased fraud detection rates by 50%.
By reducing fraud rates, insurance companies can control premium increases and minimise the cost to consumers of criminal behaviour.
For Australian insurers, the message is clear. Automating with AI is no longer just about streamlining operations and reducing fraud; it is about enhancing customer satisfaction and positioning the organisation for future success.
To learn more about how AI and machine learning can transform the Australian insurance sector, visit Here.
