General Insurance Insights & Analysis 2026

Australian insurers continue to prioritise digital and AI investments as a way to simplify complex technology architecture, modernise legacy systems and automate manual processes. Investment in the technology and data foundations to support a seamless customer experience, manage data privacy, cyber security, and successfully implement AI are top of mind.

The AI revolution continues to gather pace and insurers must reconsider how they will operate, engage with their customers and manage risk in a quickly changing landscape. AI adoption varies across the Australian industry, with insurers deploying AI for a number of purposes, most notably claims processing, to analyse and validate claims swiftly (including detecting fraudulent claims), and to improve customer retention. Other uses include algorithmic underwriting, using alternative data to price policies, and managing customer complaints. Despite the growing benefits to both customer-facing and back-office processes, our global KPMG 2025 Insurance CEO Outlook noted that 51% of CEOs considered data readiness a primary challenge in implementing AI, and we note some Australian insurers are prioritising modernising their legacy systems and data ahead of accelerating their AI deployment.

On the people front, insurers must be aware of the need to prepare their workforces for AI, which may mean sourcing new talent, upskilling existing team members and rethinking structures and roles for a world of human-AI collaboration. Fostering an AI-positive culture and maintaining a strong employee value proposition to attract and retain staff is essential.

When asked about the main obstacles to implementing AI, the top response in our global KPMG 2025 Insurance CEO Outlook was ethical challenges (56%). Consumers may be skeptical of their insurers’ use of AI. Strong governance and responsible AI frameworks can help to build trust in AI and confidence in fair outcomes. Building customer trust in AI use across pricing, risk profiling, and claims is likely to be crucial for the successful adoption of AI. 

Insurance has always been about pooling societal risk in a way that creates value for policyholders, insurers, and society at large.  Our global KPMG 2025 Insurance CEO Outlook found 72% of CEOs agree that sustainability is embedded in their corporate strategy and business models.  There is a strong business case for doing so, as general insurers are at the forefront of climate change, with direct exposure to claims from events such as floods, bushfires, storms and cyclones. 

In addition, 50% of CEOs stated their businesses are actively developing and launching new products or services that address the energy transition and meet sustainability demands.  These include new insurance products for producers of biodiesel, green hydrogen, carbon capture and energy-efficient technologies, insuring against risks in renewable energy project construction and production, and weather-indexed crop insurance to help farmers cope with volatile weather conditions.

With the Australian Sustainability Reporting Standards (ASRS) now in effect, we have seen the first round of reporting of climate-related financial disclosures by entities with 31 December 2025 year-ends, with other Group 1 insurers following at 30 June 2026. Insurers must now disclose information about climate-related risks and opportunities. These disclosures include governance, strategy, risk management, metrics and targets, and include disclosures on scenario analyses and greenhouse gas emissions.  Similar to financial reporting, insurers must have an auditor’s assurance report on their sustainability report. The assurance requirements have a phased approach starting with limited assurance over a selection of disclosures and moving to reasonable assurance of all climate-related financial disclosures for years beginning 1 July 2029.

With the backdrop of inflationary pressures and elevated levels of natural hazards, insurers continue to target simplification and cost optimisation. There is growing appetite for inorganic growth, as insurers seek to reorganise, reduce costs, improve customer services and modernise legacy systems. 

In KPMG's 2025 global publication Insurance transformation: The new agenda, 75% of insurers expect to reduce costs by at least 10% by 2030, and only 41% considered themselves well-positioned to grow revenues. Further, 78% have plans to accelerate existing cost reduction initiatives over the next 2 years, and 80% plan to re-focus cost reduction initiatives.

There is recognition that real, sustainable cost transformation comes from doing things better and removing the friction in the ways of working across the enterprise. Three big transformations at the top of the insurance agenda are embedding AI into new ways of working, improving data and analytics capabilities, and addressing cyber security and fraud. 

Insurance leaders expect to get their biggest bang for their buck from digitalising key functions, introducing greater process automation, updating legacy technology architecture and reimagining business processes. Expectations are these will lead to improvements in the cost per customer. Having said all this, big technology budgets don’t necessarily lead to big cost improvements in terms of true efficiency and effectiveness, and insurers need to strategically simplify and optimise their business.  

The ‘new-normal’ high pace of regulatory and compliance change continues. Increasing compliance expectations, greater accountability of executives, and more rigorous oversight of how insurers communicate, price, manage operations, respond to emerging threats and govern risk remain key focus areas for 2026 and beyond.

2025 saw two prudential milestones, with CPS 230: Operational Risk Management and the Financial Accountability Regime (FAR) taking effect. With increasing levels of natural hazards, reliance on third parties and evolving cyber threats, CPS 230 represents a foundational positive regulatory shift in how general insurers must now manage their risk, resilience and compliance programs. Meanwhile, FAR has increased transparency, accountability and overall governance standards across the industry.

During 2026, APRA will continue to engage with entities to assess how effectively they are meeting CPS 230 requirements, with the dual aim of promoting leading practices and holding organisations accountable where gaps exist. To prepare, organisations must be able to clearly demonstrate that the core principles of the Standard are fully understood and embedded in their updated policies, processes, and practices – providing tangible evidence of a robust, risk-managed, and resilient business.  

For those who have met expectations, the priority shifts to ongoing enhancement – continually strengthening resilience and risk management across the business to keep pace with evolving regulatory requirements, emerging risks, and a rapidly changing operating environment. A well-designed, strategically aligned risk management framework that meets regulatory requirements is no longer merely operational good practice but is essential.

The pace of change has been high, and it remains important for the general insurance industry and regulators to continue to work together when embedding risk and compliance practices and striking the right regulatory balance to maintain sector safety.

The Insurance Council of Australia’s The Cost of the Regulatory Burden (PDF 105KB) highlighted how regulation is costing between $2.5 and $3.5 billion a year, with over 30,000 regulatory obligations enforced by 25 different authorities under 300 different regulatory instruments. This represents 4-5% of the $70 billion premium written each year. The Insurance Council of Australia noted “Much regulatory cost is reasonable – a strong regulatory framework protects consumers and keeps the sector stable – but the combined impact of 30,000 regulatory obligations is duplication, increased costs, and delays for insurance customers.” 

Looking forward, management of data privacy breaches, reliance on third parties, cyber incidents and the use of AI are key areas of interest to APRA, as well as the wider community.

Cyber threat landscape

The cyber threat environment facing Australian organisations has intensified significantly, driven by rapid digitisation, increased cloud dependency and the accelerating capabilities of AI enabled attacks. Threat actors – state based and criminal – are now deploying highly automated, scalable intrusion techniques that can rapidly compromise core systems, disrupt operations and expose large volumes of sensitive data.

For insurers in particular, the combination of expansive customer datasets, interconnected ecosystems and legacy technology estates heightens both vulnerability and regulatory exposure. Reflecting this, the KPMG 2025 Insurance CEO Outlook shows 83% of insurance CEOs now view cybercrime and cyber insecurity as the greatest barrier to growth. Importantly, cybersecurity has become the top risk mitigation investment priority (53%), underscoring the strategic imperative for boards to treat cyber resilience as a core business capability – not a technology issue.

Cyber insurance market

At the same time, cyber insurance continues to expand globally as organisations seek additional financial protection against operational disruption, data breaches and ransomware events. However, the sector remains volatile: limited longitudinal loss data makes pricing difficult, while high severity claims and fluctuating loss ratios continue to challenge market sustainability.

For Australia to build a resilient and mature cyber insurance ecosystem, coordinated action is required across industry, government and the insurance sector. Key focus areas should include improving risk transparency, strengthening legislative and regulatory frameworks, and driving uplift in baseline cyber maturity.

For boards, this means ensuring their organisations adopt proactive resilience measures – such as robust defence strategies, actionable incident response plans and clear accountability models – to reduce the frequency and impact of cyber incidents and support insurability in a tightening market.