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From Principle to Practice: Governing AI in General Insurance

Artificial intelligence is already being used across general insurance, from underwriting and pricing to claims and complaints triage, fraud detection, vulnerability identification, data analysis and customer communications. The governance challenge is not simply whether an AI system works. It is whether the system produces appropriate, defensible and consistent outcomes throughout its lifecycle. Four principles provide a practical foundation: Fairness, Adaptability, Explainability and Reliability. 1. Fairness Fairness means that any of the outputs generated by AI should be equitable and free from bias. It should not discriminate against any communities, groups, or individuals. Fairness can sometimes be a trade-off between procedural fairness (ensuring the system or process treats all people the same) and representational fairness (ensuring inequalities in the real world or past data, e.g. gender bias, aren’t perpetuated). [AI Fluency for directors, The University of Sydney, Sydney Executive Plus+ 2026) In general insurance, this is particularly relevant where AI is used for: risk selection, pricing or policy renewal; claims triage and fraud detection; identifying potentially vulnerable customers; prioritising complaints; or recommending whether a claim should be accepted (in full or in part), investigated or declined. Fairness does not necessarily mean treating every customer identically. Insurance legitimately differentiates between the type of consumer and general insurance product. The question is whether the differentiation is supported by relevant information, is legally permissible and does not operate as an inappropriate proxy for a vulnerability factor. Controls should include testing datasets for bias, comparing outcomes across customer cohorts, reviewing false-positive and false-negative rates, and requiring human review before an adverse or high-impact decision is made. 2. Adaptability Adaptability in an AI system refers to the ability to adjust to new information that falls outside its training data. A machine learning system that has learned to identify patterns in training data can be extremely efficient at predicting those patterns in the future. But they often struggle to cope with disruption and change, when the world changes and no longer matches its training data. (ibid, AI Fluency for directors) Adaptability requires: monitoring for model drift and unexpected changes in outcomes; reassessment when the model, data, intended use or regulatory (or Code) environment changes; defined triggers for escalation, suspension or human intervention; change-management controls over vendor and internal updates; and a process for retiring AI systems that are no longer suitable. Governance should therefore continue after implementation. Approval at the commencement of an AI project is not enough. 3. Explainability AI should be transparent and explainable. Transparency is about how much of your system’s inner workings you can understand. Explainability means how and why certain decisions are made can be understood by the people who interact with the AI, be they employees or customers. (ibid, AI Fluency for directors) This is critical where AI contributes to: premium or policy coverage decisions; the identification of suspected fraud; claim delays, part settlements or denials; complaint outcomes; or customer facing advice or communications. Explainability does not require every employee to understand the technical construction of a model. It does require

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October 12, 2026

Broker commissions and wholesale clients: legal requirement or professional expectation?

Important Note This article does not suggest that commissions are improper or criticise brokers who operate within the current legal and Code frameworks. Its purpose is to examine whether professional expectations concerning commission disclosure should extend beyond the requirements proposed for retail clients under the draft 2027 Code. What is the issue? The Independent Review of the Insurance Brokers Code of Practice, report December 2025 recommendation 3 provided: Section 6.1 of the [draft] Code should oblige signatories to provide all individual and small business clients with remuneration disclosure regardless of the type of insurance product. NIBA’s response, published 21 January 2026, stated We support the principle of extending remuneration disclosure to all retail clients as defined under Section 761G of the Corporations Act 2001. This includes small business clients who fall within the statuteʼs retail client definition and will apply regardless of policy type. NIBA did not adopt the reviewer’s broader proposal. Instead, it applied the statutory retail-client framework in section 761G, with an additional disclosure requirement for strata insurance. For small business clients, the statutory approach means mandatory disclosure generally turns not only on the size of the business but also on whether the insurance product is one of the prescribed general insurance products treated as retail products under section 761G. The draft 2027 Code adopted this position, other than for strata insurance, at section 7.1: We must disclose our remuneration: for general insurance products that are retail products under the Corporations Act 2001 (Cth), to every client who is an Individual or a Small Business and to whom we provide Covered Services; and for all strata insurance (both Residential Strata Insurance and Commercial Strata Insurance) for which we provide Covered Services, to the client, whether or not the client is a retail client under the Corporations Act 2001 (Cth) For this purpose, the draft Code defines Small Business by reference to the test in section 761G: A business that meets the small business test in section 761G of the Corporations Act 2001 (Cth). At the date of this Code, that means a business employing fewer than 20 people or, if the business is or includes the manufacture of goods, fewer than 100 people. If the law changes, the Corporations Act test as amended applies Paragraph 7.1 is supplemented by paragraph 7.2 Any client can ask us to disclose our remuneration. This applies whether the client is retail, wholesale, strata or a business of any size The inclusion of strata insurance was in response to the recent criticism of remuneration arrangements associated with strata insurance The decision to restrict the disclosure of remuneration (specifically commission payments) to retail clients (other than strata) has met with criticism, including a view from the Quality of Advice reviewer Michelle Levy as reported in Insurance News 15 September 2026 Ms Levy told Insurance News: “In my view a person who is a professional, acting in the best interests of their client, has an ethical obligation – if not legal obligation – to disclose

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October 5, 2026

What is the value of compliance and contrition in financial services?

The Federal Court today imposed penalties of $35 million against Harvey Norman Holdings Ltd and $20 million against Latitude Finance Australia for misleading conduct and false or misleading representations they made in a national advertising campaign promoting a 60-month interest free and no deposit payment method for goods purchased at Harvey Norman stores. The…

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September 21, 2026

From good faith to fairness – the regulatory evolution of claims handling in Australia

Introduction: why “fairness” has become the organising idea in claims Claims handling is where the insurance promise is either delivered or denied. In Australia, expectations about claims conduct have historically been anchored in the duty of utmost good faith implied into insurance contracts and expressed in s 13 of the Insurance Contracts Act 1984 (Cth) (ICA). That duty remains central to modern disputes, but it is no longer the sole regulatory “north star”. Since claims handling and settling was brought within the definition of a financial service from 1 January 2022, claims conduct has been reframed through the AFSL regime and, in particular, the obligation to provide financial services “efficiently, honestly and fairly” (EHF) under s 912 A(1)(a) of the Corporations Act 2001 (Cth). That obligation is now complemented, and in many respects operationalised, by the GI Code of Practice (GI Code), which has steadily moved from principle to process, and is now being redrafted again to further elevate claims standards, vulnerability supports and governance. This article traces that evolution: from good faith, to fairness, to the “fairness-by-design” direction signalled by the Draft GI Code. 1. Utmost good faith: the original claims-handling guardrail 1.1 The duty as an implied condition of the insurance bargain The duty of utmost good faith in ICA s 13 is often described as a key statutory expression of a long-standing insurance norm. In modern authority, the High Court has emphasised that s 13 is not a free‑standing general duty, but is to be understood in a way that aligns with the duty’s operation as an implied contractual conditiongoverning the manner in which rights, powers and obligations are exercised “under or in relation to” the contract. That framing matters in claims because the “pressure points” in claims, information requests, investigations, repair pathways, reserving rights, reliance on remedies for non-disclosure or misrepresentation, partial admissions and settlement strategy, are all exercises of contractual or statutory rights in connection with the contract. 1.2 What good faith has come to mean in claims conduct (and what it does not) Although the duty is contextual and case-specific, judicial discussion and regulatory pleadings have repeatedly linked utmost good faith to commercial standards of decency and fairness, due regard to the insured’s interests, and conduct that is not merely “not dishonest” but also not oppressive, capricious or unfair in its practical operation. At the same time, a persistent theme in modern commentary is that utmost good faith is not fiduciary and does not demand “unnatural altruism”; it is compatible with insurers legitimately protecting their own interests within the contract and the statute, provided that protection is pursued consistently with the duty’s constraints. The High Court’s decision in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38 illustrates the point. The case arose from claims and settlement communications following cyclone damage, complicated by non‑disclosure of pre-existing defects and a dispute about the scope/sequence of works and allocation of costs. The High Court ultimately held that the insurer’s conduct (including reliance

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September 14, 2026

I’m a Senior Manager in general insurance in Australia. What are my compliance obligations?

1. Accountability layers The Australian regulatory landscape (including industry Codes) has shifted over the years to bring in tighter personal accountability. Obligations attach to Senior Managers based on the nature and complexity of the business. A robust risk and compliance framework protects Senior Managers as they manage the challenge of wearing multiple hats. High-level obligations include: Prudential expectations (APRA):governance, risk discipline, and ensuring the right people are in the right roles, including formal fit and proper assessments of “responsible persons”. Conduct and licensing (ASIC / AFSL):if your business holds (or operates under) an AFSL, the licensee must meet the Corporations Act “general obligations”, including the obligation to deliver financial services efficiently, honestly and fairly, and to maintain organisational competence. Individual accountability (FAR):for general insurers, the Financial Accountability Regime creates an enforceable accountability framework for both the entity and accountable persons (senior executives with actual/effective responsibility over substantial parts of the business). 2. APRA Prudential Standards 2.1 Fit and Proper (CPS 520): it’s not a check-the-box HR process APRA’s Prudential Standard CPS 520 (Fit and Proper)sets minimum requirements for APRA‑regulated institutions (including general insurers) to determine whether people in positions of responsibility are fit to hold those roles. The general insurer must maintain a Fit and Proper Policy meeting CPS 520 requirements. Fitness and propriety of a responsible person must generally be assessed before appointment and reassessed annually. 2.2 Fit and Proper is ultimately “owned” by the Board, but executed by management CPS 520 states that the ultimate responsibility for ensuring fitness and propriety of responsible persons rests with the Board (or equivalent). In practice, senior management must ensure board reporting is accurate, timely, and defensible, particularly where there are adverse findings, exceptions, or interim appointments. 3. FAR (Financial Accountability Regime): personal accountability for insurance executives 3.1 FAR applies to general insurers Under the FAR Act’s simplified outline, general insurers are expressly listed as accountable entities. 3.2 Who is an “accountable person”? The FAR Act describes an accountable person as primarily someone with actual or effective senior executive responsibility for management or control of the entity, or of a significant/substantial part or aspect of operations (including within a corporate group). So if you run a major function: claims, underwriting, distribution, complaints, risk/compliance, IT/operations, finance, HR/people, or a large business unit, FAR may be relevant, even if your title isn’t “C-suite”. 3.3 What the entity must do under FAR (and why you’ll be involved) The FAR framework includes: Accountability obligations and key personnel obligations , including ensuring responsibilities covering all parts of the business are appropriately allocated to registered accountable persons who are not disqualified; Deferred remuneration obligations; Notification obligations; and Civil penalties may apply if the accountable entity fails to comply with these obligations. 3.4 Practical FAR “behaviours” for senior managers Even when the FAR paperwork is handled centrally, FAR changes what good looks like in day-to-day leadership: Clear responsibility boundaries (“I own this end-to-end”). Evidence of oversight (management information, controls assurance, issue management). Early escalation and documented remediation. 4. AFSL

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September 7, 2026

How Do General Insurance Codes Operate Alongside Financial Services Laws?

The General Insurance Code of Practice (GI Code) applies to all insurers who have adopted it. In addition, the GI Code applies to the insurer’s Employees, Distributors, Service Suppliers, External Experts and authorised repairers. Practically, this includes Underwriting Agencies and any broker acting under a Binder, TPAs, Investigators, Loss Assessors or Loss Adjusters , Collection Agent, and home and motor vehicle repairers. Lloyd’s has adopted the Code subject to the condition that it only applies to policies issued by an Australian Coverholder under a binding authority agreement and claims managed in Australia. The Insurance Brokers Code of Practice (Brokers Code) applies to all NIBA members. In addition, the Brokers Code applies to the NIBA members (brokers) employees, agents and representatives (including authorised representatives). Both Codes are currently undergoing review. The role of Codes With the numerous and substantial changes to general insurance financial service laws since 2021 and upcoming release of the revised 2026 GI Code and Brokers Code it is useful to explore the role of Codes, and how they operate with general insurance financial service laws. ASIC’s view on the role of Industry Codes ASIC considers a code to be essentially a set of enforceable rules for the conduct of code subscribers. Codes should therefore improve consumer confidence in a particular industry or industries. (RG 183.2) ASIC believe that the primary role of a financial services code is to raise industry standards and deliver substantial consumer benefits. (RG 183.3) ASIC expects an effective code to do at least one, and preferably more than one, of the following (RG 183.4): (a) address specific industry issues and consumer problems not covered by legislation; (b) elaborate on legislation to deliver additional benefits to consumers; and/or (c) clarify what needs to be done from the perspective of a particular industry, practice or product to comply with legislation. What do the Codes say about operating with financial service laws? The Code and the law The current GI Code covers this in paragraphs 18-20 (my emphasis): The Code is designed to work with the many laws that cover our conduct and to deal with issues not dealt with in legislation. The Code does not limit your rights under law against us. Where there is an obligation under the Code in addition to a legal requirement, we will also comply with the Code, unless doing so would be in breach of the law. If there is any conflict or inconsistency between the Code and any Commonwealth, State or Territory law, then that law prevails. Draft 2026 GI Code Under the draft 2026 Code the material changes to the 2026 Code compared to the current are: the 2026 Code acknowledges that sometimes specific Code requirements are a higher standard than required of us by the law. (para 19); and obligations of the law or regulatory requirements are not incorporated into your policy and the law or regulatory requirement will prevail to the extent of any conflict or inconsistency. (para 20) Brokers Code The Code is designed

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August 24, 2026