As the demand for smarter, tech-driven solutions grows, the insurance ecosystem in Australia and New Zealand (ANZ) is undergoing a dramatic shift with Gartner report forecasting the market to grow at an impressive 17.5% annually between 2023 and 2026.
However, as the industry evolves, companies face increasing pressure to innovate and meet the demands of a tech-savvy customer base while navigating complex regulations and risks. To explore how HCLTech is addressing these challenges, the Trends and Insights team spoke to Manoj Ponnath, Senior Sales Director for the ANZ region at HCLTech.
"The financial services and insurance industries globally are highly regulated, and the ANZ region is no exception. There are a considerable number of regulations that financial services including insurance companies need to comply with, and this is only increasing as new laws come into play or existing ones are updated,” Ponnath shared.
He went on to emphasize that Australian regulators such as the Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA) are constantly updating standards around capital requirements, data protection and security practices. "For example, the implementation of the CPS 234 standard, focused on safeguarding against information security incidents and IFRS 17 for accounting standards, have required substantial investments in technology upgrades. In 2025, regulations such as CPS 230 -Operational Risk Management and Financial Accountability Regime will come into effect.
As the regulatory scene continues to evolve, the pressure on Insurance companies to stay compliant is mounting. "Regulations are proliferating across multiple fronts, and it’s a constant challenge for insurers to ensure compliance while driving forward with their digital transformation initiatives," he said.
Manoj Ponnath, Financial Services (FSI), Growth Lead, HCLTech, ANZ
Climate change and cybersecurity: The growing threat on insurance
A key challenge that is increasingly affecting insurers in the ANZ region is climate change. The region has been hit hard by extreme weather events, including bushfires, unseasonal rains, cyclones, and floods, which have caused significant financial losses. "In the last decade alone, Australia has seen an estimated $30 billion in losses due to natural disasters. These extreme events are increasing in frequency and severity, which has a direct impact on insurance costs," he pointed.
Climate-related risks are also influencing the reinsurance market, driving up premiums and making it harder for consumers to find affordable coverage. "Insurance companies are now facing pressure on two fronts: the increasing cost of reinsurance and the challenge of keeping premiums reasonable for consumers. As a result, the public is less loyal to brands and more focused on finding the best price," Ponnath observed.
On the other hand, cybersecurity remains one of the highest-rated risks for insurers, with a sharp rise in attacks such as ransomware and espionage. "Cyber threats are only going to grow, particularly with advancements in quantum computing and AI. The sophistication and scale of cyberattacks are increasing, and the financial services sector, including insurance companies, is a prime target for hackers,” he elaborated.
Historically, the insurance sector has been slow to adopt innovative technologies. "Insurance companies have often not kept pace with technology adoption and now they are investing aggressively in areas like cybersecurity. The challenge is not just about defending against today's threats, but being able to anticipate what tomorrow’s cybercriminals might do, he elaborated.
The impact of such attacks can be devastating, not just in terms of financial losses, but also in terms of reputational damage and the loss of consumer trust. "There's a major talent crunch in this space as well. Insurers are struggling to find skilled professionals who can help them tackle these complex challenges.
Technology as a solution: Digital transformation in insurance
Despite these challenges, Ponnath remains optimistic about technology’s potential to address insurance sector pain points. Innovations in AI, blockchain and data analytics are helping insurers streamline operations, enhance customer experiences, and improve risk management.
"Digital transformation is no longer optional for insurance companies. It is a matter of survival," he said. "Emerging technologies like AI can help automate claims processing, improve fraud detection/risk management and enhance customer service. Blockchain can make the underwriting and claims processes more transparent and secure, while data analytics can provide deeper insights into customer behavior and risk management."
HCLTech is helping insurers navigate this transformation. "We’re collaborating with our clients to implement solutions that not only meet regulatory requirements but also enable them to innovate and stay competitive in a rapidly changing market," he explained.
Cloud adoption: Overcoming legacy barriers
The insurance industry, like many others, is burdened by legacy infrastructure. Many insurance companies across life, health and general insurance sectors have accumulated vast, outdated IT estates, often due to mergers and acquisitions. Ponnath pointed out that while companies are keen to modernize, the process has been slow.
One reason for this slow adoption is the complexity of integrating acquired businesses, each with its own legacy systems. Many companies are taking incremental steps towards cloud adoption, often opting for "lift and shift" migrations — moving existing infrastructure to the cloud without significant modernization. This approach allows companies to begin leveraging the benefits of the cloud, even if their systems are not fully optimized.
A multi-cloud strategy is becoming more common, with insurance companies diversifying their cloud infrastructure across multiple providers. However, challenges remain, particularly when it comes to regulatory compliance. As businesses modernize, they must balance the need for innovation with the strict regulatory requirements that govern the sector.
Generative AI: Potential and pitfalls
The rise of generative AI has garnered a lot of buzz in various industries, including insurance. However, Ponnath suggested that the initial excitement has settled, and companies are now looking to adopt AI in a more practical and measured way. AI and Gen AI are becoming integral to operational processes, from improving software development life cycles (SDLC) to automating service desk functions.
Gen AI has also shown promise in business process optimization. In the insurance sector, applications for content comparison, claims processing, fraud detection and issue resolution are being explored. However, several of these initiatives remain in the pilot phase, with few companies scaling them to production.
One critical point he made was that the real value of AI does not lie in adopting the technology for the sake of it but in solving specific business problems. HCLTech’s AIFoundry delivers value stream innovation through a modernized data and AI stack, cognitive infrastructure, distributed data capabilities and data driven applications. Its AIForce platform accelerates software engineering lifecycle, augmenting velocity, efficiency and innovation across the SDLC.
HCLTech has collaborated with clients to implement use cases such as revolutionizing customer support, automating API testing and improving document navigation and customer interaction. Unlike its banking counterparts, the insurance sector in Australia has been more cautious in AI adoption. As companies continue to modernize their systems and data infrastructure, AI's potential to transform business operations will become more apparent.
The road ahead
The journey towards modernization in the ANZ insurance sector is complex and incremental. Companies are taking measured steps to move from legacy systems to the cloud, adopting AI and other technologies, however, they must balance innovation with regulatory requirements, ensuring that they maintain trust and compliance while embracing innovative solutions. In the end, a forward-looking, strategic approach will be key to navigating the insurance industry in ANZ.
