AI-Powered Transformation Urged for Indian Insurers and Digital Public Infrastructure

Indian Finance Minister Calls for AI-Driven Overhaul in Public Sector Insurers

Indian Finance Minister Nirmala Sitharaman has urged all public sector general insurance companies (PSGICs) to undergo immediate digital transformation. The goal is to enhance operational efficiency and service quality by integrating artificial intelligence (AI) technologies, especially in claim settlements for Motor Own Damage and Health insurance segments.

Sitharaman emphasized the importance of advanced data analytics and AI in developing accurate pricing models and efficient claims management systems. These tools are essential for better risk assessment and ensuring the long-term sustainability of insurers.

She also stressed innovation in insurance products to address emerging risks such as cyber fraud. PSGICs have been instructed to diversify their offerings and align them with evolving customer needs. The Ministry of Finance has set clear timelines for implementing these changes with regular progress reviews to ensure accountability.

Key points from the Finance Ministry's statement:

• Urgent digital transformation of PSGICs with AI-driven claims processing.
• Focus on Motor Own Damage and Health insurance for faster, accurate claim resolution.
• Use of advanced analytics for precise pricing and claims modelling.
• Development of innovative insurance products for new-age risks like cyber fraud.
• Strategic partnerships with fintech firms to expand market reach and deepen insurance penetration.

The Finance Minister highlighted that AI and data tools enable insurers to assess risks more accurately and set flexible pricing strategies, which help reduce losses and maintain stability. Additionally, AI can assist in crafting products aimed at underserved communities, supporting national goals such as affordable health coverage and financial security for vulnerable groups.

With AI reducing claim processing times and errors, staff workload lowers, allowing teams to focus on enhancing customer service. Despite India's general insurance penetration sitting low at 1% of GDP—compared to the global average of 4.2% in 2023—insurance density has grown from $9 in 2019 to $25 in 2023. Sitharaman underscored the need to accelerate this growth to broaden financial protection across the country.

Finance Minister Highlights Fintech’s Role in Digital Public Infrastructure (DPI) Growth

In parallel, Sitharaman praised India's fintech sector for its contributions to strengthening the country’s Digital Public Infrastructure, which includes the Unified Payments Interface (UPI) and Aadhaar, the world's largest biometric ID system.

She encouraged states to accelerate digitization efforts, offering 50-year interest-free loans for capital expenditure as incentives for early adoption of digital record-keeping.

During a visit to Pine Labs, a leading fintech company, Sitharaman acknowledged the role of fintech firms in enabling seamless, secure financial services for merchants and MSMEs. She emphasized how DPI supports access to essential services across finance, healthcare, education, governance, taxation, and skill development for 1.4 billion people.

A recent G20 Task Force report points out that AI can enhance DPI by improving service delivery in key sectors. AI supports better decision-making, optimizes resources, personalizes services, automates repetitive tasks, and fosters innovation using open-source tools. This makes DPI more scalable and impactful.

For AI to function effectively within legal frameworks, integration with enterprise blockchain systems is recommended. This approach ensures data quality, ownership, security, and immutability, safeguarding AI systems from data tampering.

Why This Matters for Finance and Insurance Professionals

• AI-driven claim processing will reduce turnaround times and errors, improving customer satisfaction.
• Data analytics will enable more precise underwriting and risk assessment.
• Innovative insurance products addressing cyber and emerging risks will open new market opportunities.
• Collaborations with fintech firms will expand distribution channels and deepen market penetration.
• Understanding AI and blockchain integration will be crucial for compliance and operational resilience.

Finance and insurance professionals should consider upskilling in AI applications for finance to stay competitive and contribute effectively to this transformation.