Some industry stakeholders see 2025 as a landmark year for Australia’s insurance industry. Regulatory changes and impacts from artificial intelligence (AI) are two major reasons. With these risk management challenges front and centre for clients, brokers have an opportunity to become indispensable information sources.
“The rate of change is unprecedented - both in terms of regulations and technology,” said Tetiana George (pictured above).
George is a board member of Insurtech Australia and CEO of Curium, a compliance software company. She expects 2025 to be transformative for SMEs.
“For instance, updates to Design and Distribution Obligations and Unfair Contract Terms,” she said. “What’s more, there is an increasing regulator focus on customer rights – for example their right to make a complaint and the process of doing so.”
George said these challenges aren’t entirely new, but small businesses were already lagging behind on these compliance issues.
“What is changing is that they still play catch up and, with more regulations due in 2025, the gap will be impossible to close,” she said.
Many brokers focus on SME business and, she suggested, they could help close this gap.
For insurers, CPS 230 comes into force this July.
“CPS 230 will usher in a new era of operational risk management for insurers, with heightened standards around operational resilience and third-party risk management in particular,” said George.
In November, Australia’s parliament passed the Privacy and Other Legislation Amendment Bill 2024. George said these Privacy Act reforms aim to strengthen data protection and accountability. Some legal experts see these changes as the biggest in more than 20 years.
The industry’s own General Insurance Code of Practice (2020 Code) is also undergoing review.
The recommendations focused on improving protections for vulnerable customers, addressing financial hardship and refining claims handling practices. The panel has asked the Insurance Council of Australia (ICA) to submit a revised Code for regulatory approval within six months.
The recommendations covered issues including insurers’ poor-quality expert reports and long claims delays. The inquiry urged significant changes, both in insurers’ internal policies and the regulations.
“There’s real urgency for organisations to adapt to the new and changing standards, ensuring compliance while maintaining trust and delivering value to clients,” said George.
Beyond Australia, major regulatory change is also impacting the insurance industry.
However, Bethany Greenwood said she expects increasing divergence between the regulations in different countries during 2025.
Some of that divergence, suggested the group head of specialty risks for global insurer Beazley, will be created by the election of US President Donald Trump. Trump has already announced an intention to focus on promoting fossil fuel production and also the implementation of tariffs on imported goods.
“Newly elected governments are likely to bring starkly different approaches to regulation and our risk and resilience research has already shown an increase in business leaders’ concern over regulation risk,” said Greenwood,.
The Boston-based risk expert said this is likely to create directors’ and officers’ (D&O) liability risk.
Greenwood said multinational corporations must be prepared to respond to a diverse set of changes in regulations.
“Differing levels of oversight and widely shifting legal landscapes have the potential to disrupt operations, limit growth and cause costs to rise if business leaders are not prepared to respond,” she said.
Despite more acknowledgement of the limitations of AI, George said it is slowly changing the face of insurance.
“It has transformative potential to drive meaningful and lasting change within the insurance industry,” she said. “AI is redefining how insurers operate and serve their clients.”
For example, said George, there are already many AI use cases across the industry, including in everything from quoting processes and flood mapping to fraud detection and repair estimates.
However, Adrian Cox, Beazley’s London-based CEO, called for caution.
“Amid the excitement surrounding AI's potential, businesses should take stock and ensure they are taking a considered approach as they implement AI, making sure that investment in AI does not divert attention away from getting the basics right, particularly around cyber risk,” said Cox.
He said businesses will benefit from exercising caution and not overstating the use or impact of AI on their services and profitability.
“In the US, for example, we have already seen a number of high-profile cases cracking down on AI-washing, including the Securities and Exchange Commission’s fines on investment advisors Delphia and Global Predictions.”
George reminded insurance professionals that despite the hurdles ahead, some may be glad to put 2024 behind them.
“It’s been the year of bad press and reputation,” said George. “Our industry has faced huge public scrutiny and criticism following the Four Corners investigation that exposed some strata management firms receiving undisclosed commissions and kickbacks from insurance brokers – and that these strata companies had financial ties with some insurance brokers.”
However, George said 2024 also saw “a reckoning of sorts” through parliamentary inquiries.
She said much of the industry knows what it should be doing in terms of compliance. However, George said many firms continue to underinvest.
How do you see 2025’s regulatory and AI challenges? Please tell us below.
