Aussie Insurers to Cut Costs by 30% Through Tech Revamp

Rising natural disasters, inflation – driven claims, and tightened regulation have hiked underwriting expenses of Australia’s general insurers by around 20% in the past seven years, a McKinsey report shows. Meanwhile, insurance costs are becoming unaffordable for consumers, as noted in the report “The productivity imperative for Australian general insurance”.

Insurers’ operating costs have surged – 20% for incumbents, 37% for international ones, and over 100% for challengers. To tackle this, the focus is on productivity improvements in labour, IT, and third – party spending, which could slash costs by up to 30%. For labour, efforts include zero – basing functions and partnerships, with some insurers reducing costs by 20% – 40%. Offshoring rates are lower than international averages, but overseas centres help access talent. Insurers are also using software to streamline processes.

In IT, improvements could lead to 20% – 30% cost reductions. Systems are being modernised, and generative AI can boost routine tasks by 30% – 70%. Tech simplification has cut operating costs by 10% – 15%. For third – party spending, insurers aim to save 10% – 20% by optimising procurement and real estate. Some are rethinking workplace models. Insurers are urged to prioritise productivity, set targets, integrate AI, and monitor programs as these strategies are crucial for financial resilience and affordable insurance in a tough outlook.

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