Car insurance in Australia is changing faster than many drivers realise. A 2025 report from Ernst & Young and Insurtech Australia found that more than a quarter of all insurtech investment is now going into artificial intelligence, with cloud migration and digital transformation reshaping how insurers assess risk, handle claims, and set premiums. For the average driver, that means the days of filling out paper forms and waiting weeks for a claims decision are numbered. What’s replacing them — telematics, automated claims processing, usage-based pricing — will affect what you pay and how you’re covered.
Disclosure: Some links on this page are affiliate links. If you make a purchase through them, Britwealth may earn a commission at no extra cost to you. We only include products and services that are relevant to the topic.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
These aren’t distant trends. The report describes a “two-speed” market where some insurers are already using AI to underwrite policies and process claims in hours, while others are still running on decades-old mainframe systems. Which camp your insurer falls into will increasingly determine your experience — and your premium. Here’s what you actually need to know.
One term you’ll hear more often is telematics — technology that tracks your driving behaviour through a device or smartphone app and shares that data with your insurer. It’s the engine behind usage-based insurance, where your premium is calculated on how you actually drive rather than statistical averages.
What I tend to notice is that drivers often assume telematics means higher premiums, but for safe drivers it can mean the opposite. Worth weighing against the privacy trade-off, which is real.
What the new tech actually means for your premium
The headline numbers from the EY report point to a market that’s splitting in two. On one side are insurers that have built the data infrastructure to use AI and cloud platforms effectively. On the other are those still catching up. For drivers, the practical difference shows up in three areas: how your risk is assessed, how quickly claims are paid, and what data is used to set your price.
Usage-based insurance is the most visible change. Instead of a premium based on your age, postcode, and vehicle type, telematics lets insurers price based on mileage, braking harshness, cornering speed, and time-of-day driving. A driver who covers 8,000 km a year on quiet suburban roads could pay significantly less than one doing 25,000 km in peak-hour city traffic — even if they’re the same age and drive the same car.
The EY report notes that migrating from old systems is “risky and time-consuming, but necessary.” Insurers that have done it can process claims in hours using AI-driven document analysis and fraud detection. Those that haven’t are stuck with manual processes that take weeks. The gap between the two groups is widening, and it’s the driver who ends up paying — either in higher premiums to cover inefficiency or in slower service.
For context, that 25% figure represents a significant shift in where insurance money is going. When more than a quarter of all new investment targets AI, it’s not experimental — it’s structural. The insurers that deploy it effectively will have lower cost bases and better risk selection, which tends to mean more competitive pricing for the drivers they want to keep.
If you’re shopping for a policy, it’s worth asking whether the insurer uses telematics or usage-based pricing. Some offer optional discounts for installing a telematics device that tracks your driving, which can lower your premium if you’re a safe driver. Just be clear on what data is collected and how it’s used.
Where drivers get caught out by the new tech
The shift to data-driven insurance brings new pitfalls. Here are the three most common ones I see, based on what the research reveals.
Assuming your data isn’t being used
Many drivers don’t realise that insurers are already using external data sources — credit scores, social media activity, even shopping habits — to build risk profiles. The EY report highlights that AI models are increasingly influencing underwriting decisions. If you’ve never checked what data your insurer holds on you, you might be paying a premium based on information you didn’t know existed. Under Australian privacy law, you can request access to that data. The process usually involves contacting your insurer’s privacy officer and submitting a formal request — they have 30 days to respond.
Ignoring the privacy trade-off
Telematics can save you money, but it also means your insurer knows where you drive, when you drive, and how you drive. The EY report stresses that “explainable and auditable AI frameworks” are needed as models influence underwriting and claims. If you opt into a telematics policy, check what data is collected, how long it’s stored, and whether it can be shared with third parties. Some insurers let you review your driving score and improve it — others just adjust your premium without explanation.
Sticking with a laggard insurer out of habit
The “two-speed” market means some insurers are investing heavily in technology while others are treading water. If your insurer is in the second group, you’re likely paying more than you need to. The EY report notes that successful digital transformation requires “a single, trusted data foundation, modern flexible technology architecture, digital-first governance and new workforce skills.” Insurers without those foundations can’t offer the same efficiency or pricing. Comparing policies every 12 months is the simplest fix — and it costs nothing but time.
For drivers who want to check whether they’re in a high-risk category that might benefit from specialist cover, a quick eligibility check can help clarify options.
- Check whether your insurer uses telematics or usage-based pricing
- Request a copy of any driving data your insurer holds on you
- Review your policy’s privacy clause for data-sharing permissions
- Compare at least three quotes at renewal, focusing on digital-service insurers
- Ask whether your insurer has migrated to a cloud-native platform
How to make the new system work for you
Understanding how these technologies operate in practice is the difference between paying more than you need to and getting the best deal available. Here’s what to focus on.
Choosing between traditional and usage-based policies
Usage-based insurance isn’t right for everyone. If you drive long distances, at night, or in heavy traffic, telematics could increase your premium. But if you’re a low-mileage, daytime driver with smooth habits, it can cut costs significantly. The key is knowing your own driving profile before you choose. Some insurers offer a free trial period where they track your driving and give you a score — you can then decide whether to switch to a usage-based plan.
What to do when you need to make a claim
AI-driven claims processing is already here. Some insurers now let you submit a claim through an app, upload photos of the damage, and get an assessment within hours. The process typically goes: log into the app, select “make a claim,” upload photos and a description, and receive an automated decision or a callback from a human adjuster if the AI flags complexity. If your insurer still requires paper forms and in-person inspections, you’re dealing with a laggard — and it’s worth asking why.
Upcoming changes to watch for
The EY report points to broader adoption of “explainable and auditable AI frameworks” as regulators and boards demand transparency. That means within the next few years, Australian insurers will likely need to explain how their AI models reach decisions on pricing and claims. For drivers, that could mean more clarity on why your premium went up — and more ability to challenge it. The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) are both watching this space closely.
If you’re unsure about how a policy change or claim decision affects your coverage, getting a second opinion from a professional can help clarify your options.
Frequently asked questions
Will telematics increase my premium if I’m a safe driver? ▾
Can my insurer use social media data to set my premium? ▾
How do I know if my insurer has moved to cloud-based systems? ▾
What happens if I opt out of data sharing? ▾
Are AI-driven claims decisions legally binding? ▾
Will all Australian insurers offer usage-based policies by 2030? ▾
The real shift is in how risk is measured
The technology getting the most attention — AI, telematics, cloud platforms — is impressive, but the underlying change is simpler. For decades, car insurance premiums were based on averages: people like you, in places like yours, driving cars like yours. That’s being replaced by individual data. Your actual driving, your actual mileage, your actual risk profile. The insurers that can measure that accurately will offer better prices to the drivers they want. The ones that can’t will charge more to cover their uncertainty.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read The Unexpected Benefits of Car Insurance You Probably Don’t Know About (AU Edition).
Sources and Further Reading
Unlock Car Insurance Tips Through Referral Discounts — Practical ways to reduce premiums beyond the tech innovations covered here.
High-Risk Driver Insurance Tips for Better Coverage — What to do if your driving profile puts you in a higher premium bracket.
Ernst & Young Australia and Insurtech Australia (2025). Three significant drivers of insurance innovation in Australia. 🔗
