Australian insurers using AI to manage extreme weather claims

Australian insurers are contending with a sharp increase in weather-related claims as a result of more frequent and severe extreme weather events.

According to data from the Insurance Council of Australia, the first half of 2025 alone saw insurers facing more than AUD $1.8 billion in claims arising from over 148,000 incidents. Major events such as Ex-Tropical Cyclone Alfred, which accounted for over AUD $1.36 billion in losses, and significant flooding in North Queensland and New South Wales have put the spotlight on the operational pressures facing the sector.

Claims management challenges

The surge in claim volumes following major catastrophes has highlighted the need for the insurance industry to ensure critical customer support. Customers often contact their insurer while experiencing high levels of distress, seeking a rapid and empathetic response at a time when support is most needed.

Maurice Zicman, Vice President of CX Strategy at TP in Australia, commented on the challenge of maintaining service standards during these periods: "The key challenge is scaling operations rapidly while upholding fairness, transparency, and empathy. Traditional processes often struggle under the weight of these surges, highlighting the urgent need for intelligent and adaptive technologies along with human touch."

The role of artificial intelligence

Artificial intelligence (AI) is becoming more prevalent in insurance claims processing. The adoption of AI and automation is helping insurers triage urgent cases, automate routine claims from lodgement through to settlement, and use predictive analytics to foresee demand spikes prompted by changes in weather patterns.

"Artificial intelligence is not a silver bullet, but it's already transforming the way insurers manage weather-related claims. AI-driven triage systems can prioritise the most urgent cases, automation can handle straightforward claims from lodgement to settlement, and predictive analytics can forecast demand based on weather patterns."

Zicman cited a white paper by global third-party claims administrator Gallagher Bassett, which found that nearly nine in ten Australian insurers have now integrated AI into their claims processes, up 38 percent from the previous year. Emphasising the importance of blending technology with human care, Zicman stated: "The opportunity lies in combining digital capabilities with the empathy that only human claims professionals can provide, ensuring technology augments, not replaces the human empathy during times of crisis."

Tackling fraud in disaster situations

An additional challenge for insurers during large-scale weather events is the risk of increased fraudulent claims. The Insurance Fraud Bureau of Australia estimates that fraudulent activity costs the industry up to AUD $2.2 billion each year, with incidents such as inflated repair costs and staged damage more likely after disasters.

According to Zicman: "Leading CX management service providers can harness AI-driven fraud detection, image forensics and behavioural analytics to flag anomalies early. But speed must be balanced with sensitivity. False positives can erode trust with genuine claimants who are already dealing with loss and upheaval. Leading CX management service providers have the scale to also offer the capacity to deal with volume surges whilst optimising self service channels to flatten the spike."

Readiness and resilience

Insurers are recognising the need to invest in operational readiness and network collaboration to improve resilience. This involves increasing surge capacity, forming agreements with other insurers, and building partnerships with government bodies, emergency services, and community organisations.

Zicman explained: "Operationally, it's about creating claims systems that can flex rapidly under pressure, whether through redeploying teams, leveraging AI for volume management, or pre-positioning assessors in high-risk areas."

Balancing technology and empathy

While digital tools can assist in handling surges in claim volumes, Zicman emphasised the enduring importance of empathy and communication, particularly when supporting customers who have experienced trauma or loss.

He said: "Technology can process a claim, but it can't comfort a family who's lost someone or suffered significant damage to their home. Empathy, active listening and clear communication remain the most powerful tools in a claims professional's skillset. The challenge is to maintain these human qualities while scaling rapidly, along with the right digital support. Integrating compassion with innovation is key to building trust in every interaction. That's what we call a 'High-Tech, High Touch' approach."

Outlook

Zicman called for insurers to increase the integration of climate data in their planning and to use automation where possible to enable better allocation of human expertise. He advocated for greater industry collaboration to tackle fraud and for the creation of resilience frameworks linking insurers, government, and communities in preparation for future events.

He concluded: "Companies should be integrating climate data into operational planning to predict and prepare for claims surges, as well as using AI and automation strategically to speed up straightforward claims. This will allow human expertise to be focused where it is needed most."

"There should also be increased collaboration across the industry to strengthen fraud prevention without undermining customer trust.

Building resilience frameworks that connect insurers, government, and communities will better prepare the industry for the future."

He added that: "Remembering that harnessing AI and automation must always have a human element for empathy and connection during times of extreme weather events."