2025 was, in many ways, a turning point for the Australian insurance industry.
Below is a look back at some of the things that shaped the commercial insurance landscape last year, many of which will continue to define the sector for years to come.
1. Regulatory and Economic Pressures Became the Sector’s #1 Risk
In 2025, economic and regulatory pressures overtook even climate risk as the industry’s most pressing concern, according to strategic leadership sentiment captured by EY and InsurTech Australia research.
In commercial insurance, this resulted in:
- higher expectations around conduct and pricing fairness
- increased reporting and governance requirements
- inflation‑driven increases in claims costs, especially for construction, heavy motor and liability
- increased scrutiny of operational resilience and APRA compliance.
As a result, the industry saw more frequent repricing cycles, tighter underwriting controls, and more granular documentation requirements for both brokers and clients.
2. AI Use Cases Went Live
AI and machine learning moved from ‘experimental’ to ‘implemented’. Use cases being piloted in commercial insurance included:
- real-time property risk profiling
- automated claims segmentation for liability, marine and fleet
- fraud detection
- enhanced risk selection using multi-source data.
AI sharpened competitive differentiation, enabling insurers to quote faster, price more accurately, and reduce operational friction.
3. Embedded Insurance Expanded into B2B Workflows
Embedded insurance moved firmly beyond consumer applications, with commercial use cases growing rapidly in 2025. This was driven by three converging forces:
- digital transformation across commercial lines
- regulatory and cost pressures encouraging insurers to diversify distribution models
- growing SME demand for simpler, more context-aware and workflow-aligned industry solutions.
Live examples include parametric crop-yield protection, which has been embedded into agricultural input purchases in Australia, with future opportunities ranging from livestock mortality cover being embedded within livestock management systems to catastrophe cover being embedded in strata management platforms.
For commercial insurers, this opened new distribution models and facilitated access to small business customers at points of transaction. It also means we will continue to see better alignment between exposure and coverage, with insurance appearing exactly when it’s needed, and the ability to offer more targeted and event-driven protection.
4. Pricing Stress Increased Across Commercial Lines
The Insurance Council’s 2025 snapshot identified a number of major costs impacting commercial customers. These included escalating weather losses, labour shortages, and steep increases in construction and repair costs.
For commercial insurers, this meant:
- stricter underwriting rules
- increased inspection and data requirements for assessing risks
- higher deductibles and reduced coverage appetite
- pressure on SME affordability.
Ultimately, the industry needs to find a balance between maintaining financial resilience and ensuring customers, especially SMEs, retain access to affordable, fit-for-purpose protection.
5. Reinsurance Reform Set the Tone for Commercial Market Conditions
APRA’s refined reinsurance reform proposals, released in October, aimed to make it easier to access different forms of reinsurance, while continuing to safeguard policyholder interests. These changes arrived at a time when global reinsurance costs continued rising, squeezing capacity for commercial carriers and placing pressure on pricing, deductibles and underwriting appetite. The proposed easing of reinstatement requirements was particularly impactful for commercial insurers heavily exposed to Nat-Cat volatility in property, infrastructure and industrial portfolios.
The reforms open doors to more flexible and efficient reinsurance arrangements, but only if insurers modernise their capital, underwriting and risk management approaches accordingly.
6. Climate and ESG Regulation Drove New Data and Modelling Capabilities
With mandatory climate disclosures commencing in 2025, both insurers and corporate clients faced higher expectations for transparency around climate exposure.
Commercial insurers responded by integrating:
- climate-adjusted rating models
- ESG data capture at policy and portfolio levels
- scenario and transition‑risk analytics
- enhanced risk reporting frameworks
Insurers should now act to turn these new climate and ESG data capabilities into competitive advantage by using them to differentiate risk selection, justify pricing, and strengthen portfolio resilience.
7. Cloud and Data Modernisation Became a Strategic Divider
EY’s research highlighted a widening split between insurers successfully executing cloud and data transformations and those lagging. In the commercial market, this gap is most evident in areas including:
- broker response times
- the ability to have a multi-line account view of risk
- the ability to integrate with partner platforms that expand capabilities.
Those with modern data foundations entered 2025 as clear leaders, realising higher quote volumes, reduced unmatched cash and faster time to market for new offerings. We expect to see this gap broaden further in 2026.
8. Use of Emerging Technologies Moved from Investigation to Launch Phase
While still early, 2025 saw many technologies transition from hype to reality in targeted, commercial relevant use cases. Some examples of this are:
- blockchain-based marine and cargo validation
- quantum-enabled catastrophe modelling
- IoT-driven real-time property risk monitoring
- connected-fleet telematics for commercial motor
As these technologies are embedded into more core underwriting and claims processes, they will enable insurers to realise meaningful efficiency gains and risk advantages across their commercial portfolios.
9. Profitability Held Up, But Cost Pressures Intensified
Market performance data showed that insurer profitability remained robust heading into 2025, buoyed by strong investment incomes and the fact that 2024 was one of Australia’s quietest natural disaster years in recent history.
However, beneath the headline figures, commercial portfolios experienced rising loss costs due to:
- construction material inflation
- supply-chain challenges
- higher motor repair costs
- rising reinsurance premiums
Insurers will need to continue to balance rising costs in order to maintain sustainable margins in 2026, in particular following the increased hazard activity we saw in 2025.
10. InsurTech Adoption Shifted from Start-Up to Scale-Up Providers
InsurTech investment matured in 2025, with funding shifting away from rapid-growth plays toward disciplined, scalable business models.
Commercial insurers increasingly adopted these solutions to drive cost efficiencies in high‑expense-ratio commercial portfolios, especially through automation of intake, triage, bordereaux processing, and mid-term adjustment workflows.
In Summary
2025 was marked by regulatory and economic pressures, rapid technological advancement, and the growing impact of climate and supply chain risks. Insurers have responded with resilience and innovation, embracing AI, embedded insurance, and data modernisation to navigate uncertainty and deliver value to clients. Yet, beneath robust profitability, cost and risk pressures continue to intensify, demanding ongoing agility and strategic focus.
Looking ahead, insurers who prioritise digital transformation, climate resilience, and customer-centric innovation will be best positioned to thrive. As the sector continues to evolve, collaboration across the industry, between insurers, brokers, technology partners, and regulators, will be essential to delivering sustainable growth and protecting Australian businesses in an increasingly complex world.