Risk preparedness gap widens, as insurers face unprecedented and complex risk landscape

Wednesday, 26 November 2025

Risk preparedness gap widens, as insurers face unprecedented and complex risk landscape

Rising concerns around artificial intelligence (AI) and cyber threats are leading to a four-year low for Australian insurers' risk readiness, with the sector now trailing global peers, according to the latest PwC Insurance Banana Skins survey. 

The biennial survey identifies the risks that appear most urgent to insurance leaders from top general, life and composite insurance companies around the world. It includes the Preparedness Index, which considers an insurers’ readiness to manage risk, and the Banana Skins Index, which measures the industry’s perception of risks. Now in its 10th edition, the global survey’s release comes as insurance affordability pressures intensify across Australia. 

Local insurers now sit 6.6 per cent behind global peers on PwC’s Preparedness Index, as the sector navigates an unprecedented range of challenges including cybercrime, AI disruption, climate change, affordability pressures, and rising premiums. The Banana Skins Index score also decreased by 6 per cent in two years, suggesting a degree of adaptation or risk fatigue within the Australian market.  

Cybercrime remains the number one risk, followed by technology which jumped four places from sixth position. AI surged eight places to become the third-ranked risk, up from 11th in 2023, reflecting the pace at which emerging tech is reshaping risk profiles. 

Cyber, technology and AI dominate risk priorities

PwC Australia’s Insurance Leader, Antonie Jagga, said the findings point to an industry where the risk landscape is evolving faster than ever before. 

“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,” he said.

"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. That gap is a red flag." 

Mr Jagga said insurers can respond to external challenges by building and retaining talent in areas being transformed by AI, such as underwriting, pricing and claims assessment.

“Getting technology risk right is a growth strategy, not just a defensive play. Modernising legacy systems and building resilient data and cyber systems enables faster quotes for customers, sharper risk ratings and streamlined processing across underwriting and claims. What is important is that across this work humans remain at the helm, and the systems are continuously monitored as the technology evolves,” Jagga said. 

“Insurers that do this well will operate more efficiently and manage risk more effectively, providing greater value to customers,” he said.   

Affordability pressures continue to shape the agenda 

Political risk has jumped four places to fourth position, reflecting growing government and regulatory scrutiny of the sector amid rising premiums and coverage restrictions in cyclone and flood-prone regions. Growing geopolitical uncertainty in major markets also elevated the political risk concerns for Australian insurers. 

Mr Jagga said rising risks would continue to impact costs for consumers and shape the national agenda, making it essential for the industry to alleviate rising premiums.

"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," he said.

"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."

About PwC’s Banana Skins Survey

This survey uses the responses from insurance leaders from top general, life, and composite insurance companies. For the 10th edition, 698 insurance leaders from 42 territories contributed globally and 37 locally. The survey findings are released biennially, with the full report to be released in February 2026. 

For the executive summary, please see more here.