Setting the scene: why the payout model is running out of road
For decades, insurance has been a business of receiving premiums and paying claims. Insurers price risk on the basis of past experience with the promise of paying a claim should it occur and interact with their customer maybe once or twice a year, typically at the point of renewal.
But the risk landscape is being rewritten. Climate-fuelled disasters are reshaping property exposure, cyber threats are escalating in frequency and severity, the Australian population is living longer, and geopolitical volatility is feeding through into supply chains and commercial risk. At the same time, competition is intensifying from a growing field of non-traditional players, including start-ups, fintechs, health companies and other new entrants that are capturing value across the fund and insure segment. As explored in Fund and insure the next ten years of industry reconfiguration, these shifts are accelerating a fundamental reconfiguration of the industry, challenging incumbents to rethink how and where they create value.
The result? The ‘traditional’ insurance model is mismatched with the risks it is meant to cover. Premiums rise to keep pace with loss experience, affordability erodes, customer trust frays, and the cycle repeats.
There is, however, a different path. Leading insurers globally are shifting from compensating customers after the fact to proactively helping customers take measures to reduce their likelihood of claim. Rather than engaging customers only at transactional moments, like buying a policy and making a claim, they walk alongside them throughout their lives: warning homeowners before floodwaters arrive, helping businesses prevent a cyber breach, and building a continuous relationship that delivers more value to both sides.
For those who can get this right, the prize is significant. An estimated US$2.77 trillion value pool is in play across Asia Pacific to 2035 as new domains of growth reshape how we move, build, eat, work and age. PwC research shows Australian organisations closing the innovation gap achieve 2.1x greater revenue from new products and services, alongside higher margins. And this isn't only a commercial story – under a preventive model, customers live safer, healthier, longer lives.
Most Australian insurers acknowledge the future is prevention. Few have moved beyond strategy decks into genuine capital reallocation. 93% of insurance executives now believe the pace of change has outstripped traditional strategic planning – meaning the cost of inaction is rising fast.
And the way that shift plays out will look very different across retail general insurance, commercial general insurance, and life and health.
The challenges and opportunities by sub-sector
Retail general insurance, covering property, contents and motor, touches more of a customer's daily life than many other financial products. On the roads, rising vehicle complexity and repair costs are pushing motor claims higher, while in the home, everyday incidents like burst pipes, electrical faults and theft continue to drive claims volumes. Layered on top, climate change in Australia is driving floods, bushfires and storms that push claims and reinsurance costs to levels that test both affordability and availability, with the burden falling hardest on the most vulnerable parts of the community, where households have the least capacity to invest in resilience themselves. The result is rising underinsurance, with many pushed out of the market altogether.
Yet retail general insurance is also where prevention is most tangible to customers. Imagine warning a homeowner 48 hours before floodwaters arrive, with a tailored mitigation checklist. Detecting a failing pipe before it bursts, or an electrical fault before it sparks. Picking up rapid deceleration that may signal a crash and proactively checking in on a driver's safety. Each of these moves the insurer from a transactional claim payer to an everyday safety partner, improving portfolio quality, reducing claims severity, and giving customers reasons to stay beyond price. Just as importantly, it helps build resilience in the communities that need it most, keeping cover accessible and affordable for the long term.
Commercial customers face a risk profile that is broader, faster-moving and more interconnected than ever: cyber breaches, supply chain disruption, business interruption, climate exposure, director liability. Traditional indemnity products struggle to keep pace, and the broker channel that dominates distribution has limited incentive to evolve. The result is rising premiums, narrowing cover, and growing protection gaps.
Yet this is also where prevention can deliver a clear and fast return, because for businesses, a prevented loss isn't just a saved claim, it's preserved revenue, reputation and continuity. Picture vulnerability alerts before a cyber breach is exploited. Sensors across commercial property detecting leaks, fire risk and equipment failure. Site-level climate analytics informing resilience investments and dynamic underwriting. The insurer's role evolves from underwriter and payer to embedded risk advisor, with continuous touchpoints that broker relationships have rarely been able to deliver.
Life and health insurance carries the longest tail and the deepest data, yet the customer experience is often defined by underwriting at onboarding, silence in between, and friction at claim, precisely the moment customers are most vulnerable, whether facing surgery, navigating cancer treatment, or a family coping with the loss of a loved one. Longer lifespans, rising chronic disease, mental health pressures and an ageing population are pushing claims costs higher. There is also a trust dimension unique to this sector: if customers fear that health data will be used to exclude or penalise them, they will withhold it – and the prevention model collapses before it starts.
This is also a sub-sector with significant preventive upside, because the levers of behaviour change, early intervention and healthy longevity directly affect both customer outcomes and claims costs. Imagine insurers partnering with health and wellness providers to identify risks early, supporting customers to manage chronic conditions, or offering an alternative income in retirement through an annuity. The evidence is striking: insurer-led wellness models, such as South Africa’s Discovery Vitality, demonstrate how behaviour-based incentives can improve health outcomes and support longer-term longevity.
What will enable the shift
If the why is clear and the where differs by sub-sector, the how rests on three enablers that must move in concert: data, AI and partnerships.
Data: from historic record to real-time foresight
Prevention requires a different kind of data than payout ever did. Most Australian insurers carry vast legacy estates, with no single view of the customer. The data they hold is largely transactional and historic, an address, a sum insured and a claims history, not the dynamic, real-time layer prevention requires.
The use cases differ by sub-sector:
- In retail general insurance, telematics, smart-home sensors and geospatial weather feeds turn an annual policy into a continuous risk signal.
- In commercial general insurance, real-time cyber scoring, IoT across commercial property, and climate analytics support active loss prevention and dynamic underwriting.
- In life and health, wearables, genetic testing, biometric data and clinical signals enable early intervention long before a claim event – provided customers trust how that data will be used.
Trust cuts across all three but bites hardest in life and health. Customers will share data when the benefit is demonstrable, specific and in their interests – via granular, purpose-specific consent that can be revoked, not consent buried in pages of terms and conditions. They want transparency on how data will affect premiums, rewards and cover, whether refusal carries consequences, and what direct value they receive in return.
AI: funding the shift and powering the model
AI plays a dual role in the transition.
First, it funds it. Insurers cannot simply switch off their in-force books; the existing portfolio must generate the capital and margin that pays for prevention-led innovation. AI applied to claims, underwriting and expense management can release costs across operations. That dividend is the war chest for the prevention agenda.
Second, it powers the prevention model itself – translating real-time signals into proactive interventions:
- For retail general insurance customers, an AI-triggered alert warning a homeowner of a flood risk, with a tailored mitigation checklist.
- For commercial general insurance customers, an AI-generated cyber vulnerability alert before a breach, or a dynamic underwriting recalibration after a site-level resilience upgrade.
- For life and health customers, AI-supported early intervention pathways that flag deteriorating health markers and connect customers to care before an acute event.
A critical caveat applies wherever AI drives a customer-affecting decision – pricing, prevention, claims. That decision must be transparent and human-led. Trust must be embedded by design, particularly in life and health, where the stakes for customers are highest.
Partnerships: because no insurer can do this alone
Prevention requires reducing risk at its source, and the source is rarely inside the insurer's four walls. That makes ecosystems non-negotiable. There is also a strategic dimension: many of the players best placed to prevent loss, from technology providers to healthcare networks, are themselves eyeing the value pool that insurers have traditionally owned. Partnering early, including through fund-and-insure or value-in-managing models, is how insurers stay central to the customer relationship rather than being disrupted out of it. Supply chain partnerships matter too, with repairers, builders, parts suppliers, pharmacies and aged care providers all shaping both the cost and quality of outcomes. The right partner mix differs sharply by sub-sector:
- Retail general insurance partnerships centre on telcos, smart-home and IoT providers, automotive OEMs, repairers and parts suppliers, utilities, emergency services and government, particularly around climate resilience and disaster preparedness.
- Commercial general insurance partnerships centre on cybersecurity vendors, industry-specific risk engineers, technology platforms, climate analytics providers, specialist supply chain partners and government.
- Life and health partnerships centre on health and aged care providers, wellness platforms, pharmaceuticals, superannuation funds and clinicians. This is particularly critical in Australia, where TPD and income protection have been a long-running pain point for the industry, with rising claims, mental health driving a growing share of disability cover, and sustainability concerns prompting regulatory and product intervention. Stronger partnerships with clinicians, rehabilitation providers and mental health services are central to turning this around.
PwC research confirms the wider commercial logic: top performers are more than twice as likely as laggards to generate at least 60% of revenue through ecosystems, and 1.6x more likely to use ecosystems to access new markets and capabilities.
But ecosystems bring complexity Australia's insurers are only beginning to work through: data ownership, commercial terms, AI accountability, and brand exposure to partners customers may or may not trust. The wrong partner can undermine the trust you've worked hard to earn.
Bringing it together: a two-speed transition
The shift cannot happen overnight – nor should it. Insurers need to run two speeds simultaneously: protect and optimise the in-force book using AI-driven efficiency, and redeploy that dividend into prevention-led propositions. Those that do only the first will run out of relevance. Those that try to do only the second will run out of capital.
The journey will look different across the three sub-sectors:
- Retail general insurance can move first on visible, sensor-led prevention that customers feel in their daily lives.
- Commercial general insurance can move fastest on ROI, embedding active risk management into the broker and customer relationship.
- Life and health carries the longest payback but the deepest prize: longer, healthier customer lives and a fundamentally different lifetime relationship.
The (under)writing is on the wall: insurers of the future are putting down their rear-view mirrors and looking forward – using data, AI and partnerships to prevent claims before they occur.
Three questions for your next board meeting
- Have you defined what prevention looks like specifically for your retail, commercial and life portfolios – or is "prevention" still a single line in the strategy?
- Have you mapped the different partner ecosystems each sub-sector needs to reduce risk at the source?
- Is prevention a funded priority in your next budget cycle, with capital reallocated from AI-driven efficiency – or is it still a concept on a slide?
About the authors
