A report into fire risks has revealed how artificial intelligence (AI) is being adopted to provide a more resilient insurance system
Australia’s national science agency, CSIRO and the Insurance Council of Australia (ICA) have released a report outlining how artificial intelligence (AI) can help address some of the most pressing issues facing insurance for farm customers.
The ‘AI for Better Insurance: Enhancing Customer Outcomes amid Industry Challenges’ report explores how AI can help insurers manage rising operational costs, natural disaster risks, and changing customer needs and expectations.
Today, around one in three properties, with 5.6 million dwellings, face some level of bushfire risk, while one in 12 properties, 1.36 million dwellings are exposed to flood risk.
These risks, combined with inflation, labour shortages and higher reinsurance costs, have contributed to significant increases in insurance premiums and claims.
Insurance claims related to catastrophic events have increased by nearly 50% in the past five years and are expected to grow by 5% annually until 2050. These pressures are felt across the community, particularly by households in high-risk areas and those managing cost-of-living challenges.
CSIRO project lead Dr Alexandra Bratanova emphasised the critical timing of this research for the insurance industry as the sector seeks ways to deliver better value and protection for policyholders.
“The insurance sector is facing significant pressures from climate change, rising costs, and shifting customer demands,” Dr Bratanova explains.
“Our research identified seven key areas to guide the responsible adoption of AI in the insurance sector, with the potential to improve affordability and customer service, and strengthen industry resilience.”
Dr Bratanova highlighted that AI can help streamline operations and deliver more personalised customer experiences, potentially making insurance more affordable, responsive, and accessible for Australians.
“However, this transformation needs to be managed responsibly, with appropriate governance frameworks and guardrails to protect consumer privacy and ensure equitable outcomes.”
The report highlights five priority AI use cases for insurers: automated claims processing, fraud detection, enhanced underwriting, natural disaster impact prediction, and operational compliance.
ICA CEO Andrew Hall said this research was vital for the industry, as it embarks on a journey to embrace AI capabilities to better serve customers.
“This report provides a practical roadmap for insurers to harness AI responsibly while keeping customer outcomes front and centre,” Andrew Hall added.
“By implementing AI solutions effectively, we can improve affordability and enhance our natural disaster response and recovery – ultimately helping more people access the financial protection they need.”
“The industry is committed to prioritising safe adoption by addressing privacy and safety concerns, and AI system biases so that these technologies serve everyone fairly.”
The report outlines seven key areas for advancing AI adoption in insurance:
- Delivering better insurance for all through AI-driven solutions
- Strengthening governance for responsible AI adoption
- Fostering collaboration and resilience across the industry
- Adopting AI strategically and proactively
- Building AI skills for a future-ready workforce
- Becoming a trusted partner through transparent AI
- Innovating insurance products to address emerging challenges
The research was conducted in collaboration with the ICA AI Working Group and draws on insights from international frameworks and emerging best practices for responsible AI adoption.
Read the full report here to determine if your own policies need any changes.
