One in two insurers are experiencing a 'sink-or-swim mentality' in an industry undergoing rapid technological changes and facing the competitive threat of up-and-coming insurtechs.
These are the findings from the inaugural insurance industry report conducted by financial services technology provider TAS, which canvassed 50 leaders from the life, medical and general insurance sector.
Incumbents are facing the pressures of innovation, expressing uncertainty about how to best do this, particularly as local and global insurtechs enter the Australian market, the report said.
They noted legacy systems are holding them back from adapting to change as many continue to rely on systems that are simply not conducive to innovation.
Another major change sees 21% of insurers grappling with market consolidation, as ongoing merger and acquisition activities set to continue to shake up the industry particularly in the year ahead.
Insurers said while regulation is a burden, it is also a competitive saviour.
One life insurance firm said: "There's more pressure on businesses to align governance and processes with regulatory requirements from APRA, ASIC and the FSC, and to conduct regular audits - which is costing time and money."
In a heavily regulated industry, many are looking for ways to achieve best-practice compliance management and meet requirements, but at the same time, regulation poses as a massive barrier to entry for serious new players.
TAS chief executive Shane Baker said Australia's insurance industry is at a tipping point and up until now, insurers felt regulation would protect them from disruptive market forces, but that is no longer the case.
"In the year ahead, we will see further consolidation. The insurers who prosper will be those who get behind innovation, drive strategic partnerships with insurtechs and challenge themselves to continually innovate and better service customers," Baker said.