Australian Insurers Face Challenges in Risk Preparedness

The survey revealed that Australian insurers scored 6.6% lower on the Preparedness Index compared to the global industry average. Additionally, the Banana Skins Index, which measures industry perception of risks, decreased by 6% over two years, potentially indicating adaptation patterns or risk fatigue within the Australian market.

Digital security threats continue to top the list of identified risks in Australia. However, technology concerns have surged to the second position, climbing four places since 2023. Notably, artificial intelligence (AI) has emerged as a significant concern, advancing from 11th place to third in just two years.

Antonie Jagga, who leads PwC’s insurance operations in Australia, commented on the rapid evolution of these risks: “Risks related to cyber, technology, and AI are accelerating at a speed we haven’t seen before in the insurance industry. This is creating a preparedness gap that didn’t exist two years ago, and we are seeing that Australian insurers are feeling less prepared to manage these challenges compared to their global peers.”

Political risk has also climbed to fourth position among identified concerns, moving up four places from the 2023 survey. This shift reflects intensifying government attention directed toward the insurance sector, driven by concerns regarding premium increases and restricted coverage in regions vulnerable to cyclones and flooding. Global geopolitical tensions have further contributed to heightened political risk assessments among Australian insurers.

Jagga emphasised the relationship between rising risks and consumer costs: “Affordability remains the defining theme going into 2026, and we’ve seen that translate into elevated political risk. Insurers need to demonstrate they’re using technology not just to manage their own risks, but to make cover more accessible and affordable for Australians, particularly in high-risk areas.”

To enhance affordability, the industry can implement data-driven pricing methodologies. “Affordability improves when pricing is smarter. Insurers can better align premiums to actual exposure rather than traditional methods, by using AI and richer risk data. Done well, this reduces underinsurance, keeps essential protections within reach in high-risk areas, and delivers better outcomes when Australians need to make a claim,” Jagga added.

For policyholders, these findings underscore the importance of choosing insurers that are proactively addressing emerging risks and leveraging technology to offer more tailored and affordable coverage options. Staying informed about an insurer's preparedness and adaptability can be crucial in ensuring comprehensive protection in an evolving risk landscape.