Underwriting expenses often fly under the radar for many Australian business owners, yet in 2025, they’re becoming a critical factor in everything from insurance premiums to business loans. As financial institutions and insurers navigate rising costs, stricter regulatory standards, and evolving risk landscapes, understanding how underwriting expenses work—and how they affect your bottom line—has never been more important.
What Are Underwriting Expenses?
At their core, underwriting expenses are the costs incurred by insurers, banks, or lenders to assess and accept risk. This includes evaluating applications, conducting risk assessments, performing background checks, and paying administrative staff. For insurers, it also means the costs of issuing policies, commissions, and regulatory compliance.
- Direct expenses: Salaries for underwriting staff, risk analysts, and compliance officers.
- Indirect expenses: Technology investments, third-party data services, and ongoing training.
- Commissions: Payments to agents or brokers for bringing in new business.
These expenses are factored into the price of your insurance policy or the interest rate on your loan. In 2025, with inflationary pressures and enhanced regulatory scrutiny, many financial institutions are re-evaluating their underwriting processes—and costs.
Recent Shifts: 2025 Policy Updates and Market Trends
Several key trends and regulatory updates are shaping underwriting expenses for Australian businesses this year:
- APRA’s 2025 Prudential Standard Enhancements: The Australian Prudential Regulation Authority (APRA) introduced tighter controls on risk assessments and data verification, requiring insurers and lenders to invest more in compliance and technology. This translates to higher upfront underwriting costs—but potentially greater long-term stability.
- Digital Transformation: Many insurers and lenders are leveraging AI-driven risk assessment tools, reducing manual paperwork but increasing spending on cybersecurity and data analytics. While this can lower some costs, the upfront investment in technology is significant.
- Climate Risk Assessments: With extreme weather events on the rise, insurers must now factor in more detailed climate risk analyses, especially for property and business interruption policies. This adds to underwriting expenses and can impact premiums for businesses in high-risk areas.
- Commission Structures: The government’s continued scrutiny of broker and agent commissions—following the Royal Commission’s recommendations—means some insurers are shifting to fee-for-service models, altering how underwriting expenses are recouped.
For example, a Queensland-based construction firm saw its commercial insurance underwriting fees rise by 15% in 2025, largely due to stricter flood risk assessments and updated building codes. On the lending side, SMEs seeking equipment finance are facing slightly higher application fees, reflecting the cost of enhanced due diligence and fraud detection systems.
How Underwriting Expenses Affect Your Business
While underwriting expenses may seem like an internal matter for insurers or lenders, they have direct consequences for your business:
- Premiums and Loan Costs: Higher underwriting expenses are often passed on as increased premiums, policy fees, or loan establishment charges.
- Approval Times: More rigorous underwriting can slow down the approval process, especially for complex or high-value policies.
- Coverage and Lending Criteria: As underwriters scrutinise risk more closely, some businesses may face tighter eligibility requirements or find certain coverages harder to obtain.
Smart businesses are responding by:
- Investing in risk mitigation (e.g., flood-proofing properties, improving cybersecurity)
- Providing comprehensive documentation upfront to streamline underwriting
- Comparing providers, as some have adopted more efficient digital processes that can offset higher costs
Strategies to Manage Underwriting-Related Costs
As underwriting expenses continue to evolve, consider these strategies to minimise their impact:
- Negotiate Fees: Some lenders and insurers have discretionary power over application or policy fees—don’t hesitate to ask for a breakdown or potential discounts, especially for long-term customers.
- Bundle Policies or Loans: Grouping multiple insurance policies or finance products with one provider can reduce overall underwriting costs.
- Stay Ahead of Regulatory Changes: Monitor APRA and ASIC updates to understand how new requirements may affect your sector. Being proactive can help you prepare documentation and processes that align with evolving standards.
- Leverage Digital Tools: Use online portals or digital applications where possible, as these often incur lower processing costs and can expedite approvals.
Conclusion
Underwriting expenses are becoming a more prominent part of the business finance and insurance equation in 2025. With regulatory shifts, digital transformation, and climate risk all driving change, understanding how these costs affect your business—and how to manage them—will be key to maintaining your financial edge. Stay informed, be proactive, and always look for ways to negotiate and streamline your risk profile for a better deal.
