Indian finance minister urges AI-driven overhaul of insurers
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Indian Finance Minister Nirmala Sitharaman has called for an urgent digital transformation of all public sector general insurance companies (PSGICs) to improve operational efficiency and service quality. She emphasized adopting artificial intelligence (AI)-driven systems to accelerate and improve claim settlements—particularly in Motor Own Damage and Health insurance segments.
Sitharaman highlighted the strategic role of advanced data analytics and AI in building accurate pricing models and effective claims management frameworks—both critical for improved risk assessment and long-term sustainability. She also stressed the need for PSGICs to develop innovative insurance products tailored to emerging risks, such as cyber fraud, and diversify their portfolios in line with evolving customer needs.
The PSGICs have been directed to implement these initiatives within a defined timeframe, the Ministry of Finance said in a statement. Progress will be closely monitored through regular reviews to ensure effective execution and tangible results.
'The Union Finance Minister emphasised the urgent need for digital transformation across all PSGICs to improve service delivery and efficiency. This includes the adoption of AI-driven claim settlement systems, particularly for Motor Own Damage and Health insurance products, to ensure faster and more accurate claim resolution,' the statement said.
'The Union Finance Minister also emphasised the importance of leveraging advanced data analytics and artificial intelligence to develop precise pricing models and efficient claims modelling, which are essential for improved risk assessment and long-term sustainability,' it added.
To widen market reach and improve accessibility, Sitharaman encouraged strategic partnerships with intermediaries and fintech companies. These collaborations aim to expand PSGICs' national footprint and drive deeper insurance penetration across diverse demographics.
The use of AI for digital transformation of public sector general insurance companies is significant for India for several strategic, operational, and socio-economic reasons, especially at a time when private insurers are already adopting AI. Without similar upgrades, public insurers risk falling behind and losing relevance.
With AI and data tools, insurers can assess risks more accurately and set smarter, more flexible pricing, thus reducing losses and ensuring long-term stability. Moreover, as digital threats like cyber fraud grow, AI can help design new insurance products to cover these modern risks. At the same time, AI can help identify and serve underserved communities by creating tailored products. AI-enabled insurers can support key national goals like affordable health coverage, protection from disasters, and financial security for vulnerable groups.
While AI speeds up claim processing—especially in motor and health insurance—cutting delays and mistakes, it also reduces routine workload, lowering costs and allowing staff to focus on better services. Despite India's general insurance penetration remaining low at 1% of gross domestic product (GDP)—compared to the global average of 4.2% in 2023—insurance density has shown significant improvement, rising from $9 in 2019 to $25 in 2023, the statement said. Sitharaman underscored the importance of boosting penetration and density to broaden financial protection nationwide.
Finance Minister praises fintech for DPI growth
In a parallel development, Sitharaman lauded India's fintech companies for strengthening the country's Digital Public Infrastructure (DPI). India's DPI includes a Unified Payments Interface (UPI) public platform and Aadhaar, touted as the world's largest biometric identification system.
'We want every state to speed up on digitisation,' Sitharaman said in an X post.
'We are also helping them in expediting it. While giving the 50-year interest-free loans to states for capital expenditure, we underline that we will incentivise states who get on to digitise their records at the earliest. So, we want digitisation to happen sooner and in every sector,' she added.
The finance minister recently visited the office of Pine Labs, a digital fintech company in India. Sitharaman interacted with the employees, acknowledging India's fintech firms' contribution to expanding the country's Digital Public Infrastructure (DPI) and in enabling seamless, secure and inclusive financial services for merchants and micro, small and medium enterprises (MSMEs).
India's DPI—which includes digital identity, real-time payments, and consent-based data sharing—has shown how 1.4 billion people can access essential services in areas like finance, healthcare, education, governance, taxation, and skill development. This system was built through strong collaboration between the public and private sectors, enabling innovations tailored to India's large and diverse population.
A G20 Task Force report highlights how AI can further strengthen DPI by improving service delivery in sectors such as health, education, agriculture, and finance. AI can analyze vast data to support better decision-making, optimize resource use, and personalize services. It can also automate repetitive tasks and make systems more efficient.
Moreover, AI can drive innovation within DPI. Open-source tools, software, and AI models that are freely available can be reused and adapted, encouraging private sector participation and making DPI more scalable and impactful.
In order for artificial intelligence (AI) to work right within the law and thrive in the face of growing challenges, it needs to integrate an enterprise blockchain system that ensures data input quality and ownership—allowing it to keep data safe while also guaranteeing the immutability of data. Check out CoinGeek's coverage on this emerging tech to learn more why Enterprise blockchain will be the backbone of AI .
Watch: Exploring use cases for blockchain in India
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