The Australian Securities and Investments Commission’s new report on innovation in financial technology includes a dedicated section on insurance – and flags three key trends in the sector.

“Insurance innovation is becoming strategically important not because insurance has suddenly become a technology sector, but because digital distribution, model-driven underwriting and automated claims handling change where conduct risks arise and when poor outcomes become visible,” the corporate regulator says.

“For ASIC, the main issues are likely to be distribution in non-financial settings, fairness and explainability in underwriting and claims, and accountability where insurers, platforms and vendors all shape the customer outcome.”

ASIC says Australia’s insurance sector has a “partnership-based approach” to innovation.

“Rather than producing a large number of venture-backed insurtech start-ups, innovation often occurs through collaboration between incumbent insurers and technology providers.”

And it says Australia has made significant progress in digital claims management and operational automation, “particularly in responding to natural disasters”.

“Technological adoption varies significantly across firms. Some insurers are moving quickly towards cloud-based systems and advanced analytics, while others still face challenges associated with legacy technology.”

Below are the three trends, as highlighted by ASIC.

AI and advanced analytics in underwriting and claims

Insurers are using machine learning models for risk assessment, fraud detection and claims triage. In claims processing, computer vision tools can assess vehicle damage from photographs, and natural language processing can extract information from medical reports, reducing processing times from weeks to hours in some cases.

As an example, US insurtech Lemonade’s public filings show that, as of December 31 2024, roughly 55% of its claims were automated from start to finish and 96% of first notices of loss were handled by a claims bot without human intervention, enabling instant or near-instant processing for simple cases.

At the same time, concerns about algorithmic fairness in insurance pricing – particularly the use of variables that may act as proxies for protected characteristics – have attracted regulatory scrutiny in the EU and the US.

Embedded insurance

Embedded insurance refers to products offered within another digital purchase journey, such as travel insurance when making flight or accommodation bookings, device protection at electronics checkouts or ride-sharing insurance within mobility apps.

These products are increasingly distributed through digital platforms rather than through standalone insurance channels.

For example, Bolttech, a Singapore-based embedded insurance platform, connects more than 250 distribution partners with more than 80 insurers globally, illustrating how platform-based distribution is scaling.

This is not simply a distribution trend. It is also a conduct issue, because consumers may buy insurance when they are focused on another transaction rather than the insurance decision itself.

Internationally, this has already prompted regulatory responses, including the EU’s Insurance Distribution Directive, which addresses product governance and distribution standards.

Parametric and usage-based products

Parametric insurance refers to cover that pays out when a predefined trigger is met, such as rainfall, temperature, flood level or wind speed exceeding a specified threshold.

Because payment is linked to an observable event rather than a traditional loss assessment, these products can support faster claims settlement, particularly for weather-related and catastrophe risks.

Usage-based insurance refers to products where pricing or coverage is adjusted according to observed behaviour or usage patterns.

In motor insurance, for example, premiums may be linked to real-time driving data collected through telematics devices, such as distance travelled, braking patterns or time of day.

See the full report here.