India Forms AI Panel to Assess Insurance Risks

India’s insurance regulator has established a specialised working group to examine the opportunities and risks associated with artificial intelligence (AI) in the insurance sector, reflecting growing concerns over governance, cybersecurity and the protection of policyholder data as insurers increasingly adopt advanced digital technologies.

The Insurance Regulatory and Development Authority of India (IRDAI) has constituted a seven-member panel tasked with developing governance frameworks, safeguards and best practices for the responsible use of AI across the industry. The move comes as insurance companies expand the use of AI-driven tools in underwriting, claims processing, customer service and fraud detection.

The working group will be chaired by Sandeep K. Shukla, Director of the International Institute of Information Technology (IIIT) Hyderabad, and has been given a broad mandate to evaluate the impact of AI on the insurance ecosystem.

According to the regulator, the panel will assess how AI technologies are currently being used by insurers and identify potential risks, operational challenges and regulatory concerns that may arise from wider adoption. The review will cover implications for insurance companies, policyholders and other stakeholders across the sector.

A key area of focus will be the emergence of frontier AI technologies, including increasingly sophisticated models capable of automating complex tasks and decision-making processes. The group has been asked to study the risks associated with these technologies and recommend measures to protect insurers against AI-driven cyber threats and automated attacks.

The regulator is also seeking to determine whether industry-wide stress testing may be necessary to evaluate the resilience of insurers that rely on AI systems. Such assessments could help identify vulnerabilities in business operations, data security frameworks and decision-making processes before they result in significant disruptions.

The panel will conduct a comprehensive review of AI adoption across the insurance industry, examining the extent of deployment, levels of technological maturity and existing governance mechanisms among regulated entities. It will also undertake a structural assessment of AI systems currently in use to better understand how these technologies influence business operations and customer outcomes.

As AI becomes more deeply embedded in financial services, regulators around the world are increasing scrutiny of how algorithms are developed and deployed. Concerns have emerged over issues such as data privacy, algorithmic bias, transparency and accountability, particularly when automated systems are involved in decisions that affect customers’ financial interests.

Within the insurance sector, AI has the potential to improve efficiency, accelerate claims settlement and strengthen fraud detection capabilities. At the same time, experts have warned that inadequate oversight could expose insurers to operational risks, cybersecurity threats and reputational damage. Questions have also been raised about ensuring that AI-generated decisions remain transparent, explainable and fair to policyholders.

Based on its findings, the working group will recommend a comprehensive AI governance framework designed to promote the ethical, transparent and explainable use of AI tools and models within the insurance industry. The proposed framework is expected to address a range of operational areas, including claims management, fraud prevention and risk assessment.

The initiative signals India’s intention to balance innovation with regulatory oversight as artificial intelligence becomes an increasingly important component of the insurance business. By establishing clear governance standards at an early stage, the regulator aims to support technological advancement whilst safeguarding consumer interests and maintaining confidence in the insurance sector.