Insurance Sector’s AI Challenges Have Arrived

Australia | Nov 03 2025

Australia's general insurance sector faces its biggest threat in decades as AI-powered 'agentic commerce' threatens to bypass established brands entirely, forcing billions in defensive technology spending.

• AI forces defensive spending on insurers as agentic commerce threatens brand moats
• Insurers face large defensive CAPEX programs to preserve market share
• Insurance brokers vulnerable as AI agents replace human advice
• QBE Insurance structurally insulated with less than 5% exposure to commoditised retail products
• Suncorp's cloud migration and process redesign positions it ahead in the architectural race

By Valery Prihartono

The End of the Australian Insurance Moat

For decades, Australian general insurers enjoyed returns 480 basis points superior to UK peers by successfully resisting digital comparison sites and leveraging brand strength. That competitive advantage is becoming technologically obsolete.

The shift to generative AI introduces a new threat vector that makes previous digital disruption attempts look tame: agentic commerce. This isn't just another chatbot or comparison tool; it's AI autonomously managing the entire buying process for customers, ignoring brand preferences and loyalty entirely.

Global payment giants Visa and Mastercard have already launched open-architecture platforms supporting automated product comparison and purchasing in other sectors. Their business models, built on transaction volume, scale easily into insurance with minimal overhead.

The industry's traditional pushback --"terms and conditions on websites don't allow automated purchasing"-- may prove irrelevant.

Sustained affordability crises could compel regulators to support consumer-benefiting AI purchasing tools, potentially accelerating the collapse of existing moats around established brands.

Profit Exposure: Where the Pain Will Hit Hardest

The financial stakes are enormous, with exposure concentrated in commoditised insurance lines where AI agents can most easily compare and switch products.

Insurance Australia Group and Suncorp in the Firing Line

Insurance Australia Group ((IAG)) and Suncorp Group ((SUN)) face the most direct threat in Australia. Approximately 70% and 60% of respective profits relate directly to highly exposed Home and Motor insurance products.

These commoditised lines --where policy features are largely standardised and price becomes the primary differentiator-- are precisely where AI agents will operate most effectively.

When customers can delegate insurance purchasing to an AI agent that instantly compares hundreds of policies based on coverage and price, brand loyalty becomes irrelevant.

Both insurers must now prioritise defensive technology spending in these areas, not for growth or margin expansion, but purely to avoid market share erosion.

Insurance Brokers

The potential threat for brokers such as Steadfast Group ((SDF)) and AUB Group ((AUB)) could be many times larger. Their business models rely on SME customers valuing broker advice and being willing to pay for intermediation.

As customers grow more comfortable receiving guidance from Large Language Models, the high-cost broker distribution model comes under direct attack. Why pay brokerage fees when an AI agent can provide instant policy comparisons, explain coverage differences, and automatically renew or switch policies based on predetermined criteria?

Global precedents reinforce this risk. Acrisure, based in the US, has already reduced hundreds of roles linked to automating accounting functions, setting a painful precedent for the Australian intermediated sector.