By Noshin Kagalwalla
2025 was the year insurers proved that AI could help. 2026 will be the year they prove AI can be trusted. India’s insurance sector is entering a defining chapter where digital adoption, regulatory vigilance, and rising customer expectations intersect with rapid advances in AI. The question is no longer whether AI belongs in insurance but how to embed it responsibly so that every decision is faster, fairer, and fully explainable.
For years, AI in insurance has been treated like a shiny new app, one that everyone wanted but few knew how to use at scale. That era is ending. In the near future, AI will move from the periphery to the core, becoming the operating layer for underwriting, pricing, claims, fraud detection, and investigations. Straightforward claims will be settled faster, while complex cases will benefit from richer context and smarter triage. But speed alone will not define leadership. The real differentiator will be governance: whether insurers can demonstrate that models are interpretable, data pipelines auditable, and outcomes aligned with policy, ethics, and customer trust.
Underwriting enters an era of intelligent adaptation
Static, rule-based approaches will give way to adaptive models that learn from longitudinal customer data, recalibrating risk dynamically as lifestyles evolve. This progress comes with responsibility. Insurers must embed transparency and fairness into these systems, so customers understand what drives decisions and why. Data quality and lineage will become key factors, especially as compliance obligations under the Digital Personal Data Protection Act (DPDP) tighten. Poor inputs can trigger false positives in fraud detection and delays in claims, while strong data observability will strengthen accuracy and regulatory reporting.
Innovation will also demand new tools. Synthetic data, once a niche concept, will become a critical asset, enabling insurers to test new product designs and fraud defenses without compromising privacy. By integrating synthetic scenarios into the data-to-decisions workflow, insurers can accelerate experimentation and sharpen insights when real-world data is scarce or sensitive.
Building trust through governance
Customer expectations are rising, and policyholders want faster resolutions and transparency in how decisions are made. Meeting these demands requires not just technology but trust, built through clear communication, ethical AI practices, and robust governance frameworks. Regulators are moving in the same direction. IRDAI’s Vision 2047 and initiatives like Bima Sugam aim to make insurance universal and digital-first, while boards will increasingly demand documented controls for bias monitoring and audit trails. Internal audit teams will begin testing models the way they test financial controls. Those who embed governance early will scale faster and earn the confidence of customers and stakeholders alike.
The mandate for 2026 is clear: move from pilots to production but do it with accountability at the core. Insurance is ultimately a promise to protect. AI can help keep that promise at scale, provided every decision is explainable, and aligned with purpose.
The writer is VP & MD, SAS India
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.
