Australia's National Science Agency and the Australian Insurance Council (ICA) have published a report outlining how artificial intelligence (AI) can address some of the most pressing issues facing the insurance sector and its customers.
The “AI for Better Insurance: Improved Customer Outcomes amid the Industry Challenges” report explores how AI can help insurers manage rising operating costs, natural disaster risks and changing customer needs.
Today, around one of Australia's three properties (5.6 million homes) faces some bushfire risk, while one in 12 – 136 million homes are exposed to flood risk. These risks, combined with inflation, labor shortages and increased reinsurance costs, contribute to a significant increase in premiums and claims.
Claims related to catastrophic events are expected to increase by nearly 50% over the past five years, and increase by 5% per year through 2050. These pressures are felt, especially among the high-risk community, and across the community that manages households and cost-of-living management costs.
Dr. Alexandra Bratanova, lead of the CSIRO project, highlighted the key timing of this study in the Australian insurance industry as the sector seeks new ways to provide Australians with better value and protection.
“The insurance sector is facing great pressure due to climate change, rising costs and changing customer demands,” Dr. Bratanova said.
“Our research identifies seven key areas that will guide the responsible adoption of AI in the Australian insurance sector, which could improve affordability and customer service and enhance the industry’s resilience.
Dr. Bratanova highlights that AI can help streamline operations and provide a more personalized customer experience, making it more affordable, responsive and accessible for Australians.
“However, this transformation must be managed responsibly with the right governance framework and guardrails to protect consumer privacy and ensure fair outcomes.”
The report highlights five priority AI use cases for Australian insurance companies. Automatic billing processing, fraud detection, enhanced underwriting, natural disaster impact forecasting, and operational compliance.
ICA CEO Andrew Hall said the research is essential to the industry. This is because we are embarking on a journey to provide the right services to our customers to adopt AI capabilities.
“This report provides a practical roadmap for insurers to responsibly leverage AI while keeping customer outcomes at the forefront and center,” Hall said.
“Effectively implementing AI solutions will help improve affordability and enhance natural disaster response and recovery. Ultimately, it will help more Australians access the financial protection they need.
“The industry is committed to prioritizing safe adoption by addressing privacy and safety concerns, and AI systems bias their bias to ensure that these technologies serve all Australians fairly.”
This report outlines seven key areas for advancement in AI adoption in insurance.
- Provide better insurance for everything through AI-driven solutions
- Strengthening Governance for Responsible AI Adoption
- Promotes industry-wide collaboration and resilience
- We will adopt AI strategically and proactively
- Building AI skills for a future-ready workforce
- Become a trusted partner through transparent AI
- Innovate insurance products to address new challenges
This study was conducted in collaboration with the ICA AI Working Group and utilizes insights from an international framework and emerging best practices for responsible AI adoption.
The full report can be downloaded here
