India Sets Up AI Task Force for Insurance Sector

India’s insurance regulator has formed a dedicated working group to examine the growing use of artificial intelligence (AI) across the insurance industry and develop safeguards to address emerging risks linked to the rapidly evolving technology.

The Insurance Regulatory and Development Authority of India (IRDAI) has established a seven-member panel to create governance frameworks and recommend best practices for the responsible deployment of AI in insurance. The initiative comes as insurers increasingly integrate AI-driven solutions into core business functions, ranging from underwriting and claims processing to 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. The panel has been tasked with evaluating the impact of AI on the insurance sector and identifying potential risks, challenges and regulatory concerns arising from its growing adoption.

According to IRDAI, the group will assess the implications of AI for insurers, policyholders and the broader insurance ecosystem. Its review will cover the current state of AI adoption across the industry, including the extent of deployment, levels of technological maturity and existing governance practices among regulated entities.

A major focus of the exercise will be frontier AI technologies, which are becoming increasingly capable of performing sophisticated tasks with limited human intervention. The regulator has directed the panel to study the risks associated with such systems and recommend appropriate safeguards to protect insurers from AI-enabled cyber threats and automated attacks.

The group will also examine whether industry-wide stress testing should be introduced to evaluate the resilience of insurance companies that rely on AI-powered systems. Such testing could help regulators and insurers identify vulnerabilities in operational processes, data management systems and decision-making frameworks before they escalate into wider industry concerns.

As part of its mandate, the panel will conduct a structural assessment of AI systems currently being used by regulated entities. The review is expected to provide insights into how AI influences business operations, customer interactions and risk management practices across the insurance landscape.

The move reflects a broader trend among financial regulators worldwide, who are grappling with the opportunities and challenges presented by artificial intelligence. Whilst AI has the potential to enhance efficiency, improve customer experience and strengthen fraud detection capabilities, concerns remain about issues such as data privacy, algorithmic bias, transparency and accountability.

In the insurance sector, these concerns are particularly significant because AI-driven decisions can directly affect policy pricing, claims outcomes and customer access to financial protection. Regulators are therefore increasingly focused on ensuring that automated systems remain fair, explainable and subject to appropriate oversight.

Based on its findings, the working group will recommend a comprehensive AI governance framework aimed at promoting the ethical, transparent and explainable use of AI technologies throughout the insurance industry. The framework is expected to cover key operational areas, including claims management, fraud prevention and risk assessment.

By launching the initiative, IRDAI is seeking to strike a balance between encouraging technological innovation and maintaining robust regulatory oversight. The regulator’s objective is to ensure that the benefits of AI can be realised without compromising consumer protection, data security or trust in the insurance sector.