Australian Insurers Face Challenges in Cyber and AI Risk Preparedness

The survey, now in its tenth iteration, gathered insights from 698 insurance executives across 42 territories, including 37 from Australia, encompassing leaders from major general, life, and composite insurance organisations. Results revealed that Australian insurers scored 6.6% lower on the Preparedness Index compared to their global peers. 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 dominate the risk landscape in Australia. However, technology concerns have surged to the second position, climbing four places since 2023. Notably, AI has emerged as a major concern, advancing from 11th place to third position in just two years.

Antonie Jagga, leader of 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.”

Jagga further emphasised the swift rise of AI-related risks: “Two years ago, AI wasn’t even in our top 10 risks. Today, it’s number three and climbing fast, but our research shows the sector’s preparedness is declining while global peers have improved.”

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 highlighted the interplay 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 explained.

In summary, the PwC Insurance Banana Skins Survey underscores the urgent need for Australian insurers to bolster their preparedness for emerging risks, particularly in the domains of cyber threats and AI. By embracing technological advancements and refining risk management strategies, insurers can enhance their resilience and better serve their customers in an evolving risk environment.