Australia's general insurers scale up AI as regulators urge risk management

Australia's largest general insurers are accelerating their AI initiatives amid increasing calls from regulators to take decisive action to address risks.

Suncorp Group Ltd., Insurance Australia Group Ltd. (IAG) and QBE Insurance Group Ltd. are entering a new phase in their AI initiatives following foundational investments. After building their respective core technologies and partnering with technology companies such as Microsoft Corp., OpenAI LLC and Aurora, insurers are focusing on leveraging AI in various parts of their businesses.

At recent earnings calls, insurance executives highlighted AI's potential to deliver operational and financial benefits for their companies and the industry. Expected benefits include faster claims and underwriting, more personalized products and improved operational resilience.

Reaping the benefits

"We are now entering a period where the focus shifts from building those capabilities to leveraging them to better deliver better outcomes for our customers," Suncorp CEO Steven Johnston said during an Aug. 12 earnings call. The CEO noted the importance of modern infrastructure, data and AI-enabled distribution systems to meet growing demand for personalized products and pricing.

Johnston said Suncorp has invested in core technology, strategic partnerships and governance frameworks to support its AI strategy. The company is building AI capabilities across the organization, as well as scaling and accelerating AI adoption, especially in claims and customer service, Johnston said. Recent deployments have focused mainly on productivity improvements, which helped improve the expense ratio in the recent fiscal year.

IAG's investments in its AI-focused transformation program also helped control costs in fiscal year 2026, CFO William McDonnell said during an Aug. 13 earnings call. The insurer plans to invest about A$400 million in AI and technology modernization for fiscal 2027, a move that is expected to further reduce costs.

IAG CEO Nicholas Hawkins said more than 60% of IAG's workforce regularly uses AI, with more than 600 "activators" publishing over 90 AI agents to improve workflows in customer service, operations and corporate functions. The insurer's partnership with OpenAI is expected to further accelerate claims handling, especially during natural disasters and severe weather events, Hawkins said.

QBE is prioritizing capital-efficient growth and shareholder returns by accelerating efficiency through technology and AI, Group CEO Andrew Horton said during an Aug. 13 earnings call. In the Asian marine portfolio, AI solutions have reduced marine claims cycle times by 88%. QBE plans to at least double the scale of production agents across underwriting and claims to achieve lower loss ratios, faster claims and improved pricing.

Despite the upbeat messaging on AI during these recent earnings calls, shares in all three insurers traded downward in August.

– Use Document Intelligence to search and analyze conference call transcripts, research and other documents. – Create charts and infographics using ChartIQ. – Sign up for Earnings IQ Alerts to get results right after release.

Managing risks

As companies work to optimize AI, Australian regulators have issued warnings and guidance to address risks related to the technology.

The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) released a statement in August urging financial market entities to move beyond awareness and take action on risks linked to frontier AI, which is accelerating cyber and operational threats.

"The urgency of this challenge cannot be overstated," ASIC Commissioner Simone Constant said in a news release. "Threat actors are exploiting frontier AI models to identify and exploit vulnerabilities that previously may have taken a team of professionals months to find."

Recent roundtables identified the need to strengthen cyber fundamentals, including managing critical assets and systems, applying timely patches, implementing strong identity and access controls, reducing attack surfaces, ensuring backup integrity, testing response and recovery plans, and overseeing third-party risk.

Participants, which included the Reserve Bank of Australia, Treasury and the Australian Competition and Consumer Commission, noted the importance of making key decisions, such as risk appetite, escalation authority, recovery priorities and communication strategies, at the board level before a crisis. They also noted increased interest in defensive AI for threat intelligence and incident response, as well as managing third-party concentration risks.

In April, APRA urged boards to deepen technical literacy and strengthen governance over AI risks. APRA recommended that boards maintain sufficient AI literacy, oversee AI strategies aligned to risk appetite and ensure effective monitoring and fallback processes for AI-supported critical operations. Boards should also actively address evolving AI risks, including unpredictable model behavior and concentration risk with third-party providers, according to the regulator.

AI governance is embedded within Suncorp's risk management framework, covering ethics, cybersecurity, data governance, privacy and regulatory compliance, Chief Technology Officer Priyanka Paranagama said in an emailed statement. "Adoption of risk controls and monitoring is an inherent part of our AI execution," Paranagama said.

Paranagama shared that Suncorp's board and leadership receive regular AI briefings to strengthen their understanding and oversight of AI. To manage concentration risk, the insurer has diversified its use of AI services and products across multiple platforms, according to the technology chief.

QBE is investing in AI governance, workforce capability and cyber resilience to ensure safe and effective AI use, according to a spokesperson. To manage AI-related risks, the company has updated AI policies, established oversight forums and strengthened third-party risk assessments.

"We closely monitor guidance from APRA and ASIC and recognize that responsible AI adoption requires strong governance, transparency, appropriate oversight, and effective risk management," the QBE spokesperson said in an emailed statement.

IAG did not immediately respond to requests for comments.