Finance Minister Urges PSU Insurers to Use AI for Faster Claim Settlement and Better Pricing

The Union Finance Minister Nirmala Sitharaman has directed public sector general insurance companies to embrace artificial intelligence in their operations. The focus is primarily on improving the claim settlement process for motor and health insurance policies. 

This directive was delivered during a review meeting in New Delhi, where the Finance Minister called for a broad digital transformation across all public sector insurers to boost efficiency and service delivery.

FM Urges PSU Insurers to Faster and Accurate Claim Settlement Through AI

Sitharaman emphasised that public sector insurers must implement AI-driven solutions to resolve claims more swiftly and accurately. Special attention was drawn to the motor own damage and health insurance segments, where quick claim resolution is critical. The adoption of such technology is expected to significantly reduce processing time and increase customer satisfaction.

Data Analytics and AI for Precise Pricing Models

The Finance Minister also highlighted the need for insurance companies to integrate advanced data analytics and AI to formulate more accurate pricing structures. These tools are vital for enhancing risk assessment capabilities and ensuring the financial sustainability of the sector. Efficient claims modelling backed by AI will enable insurers to manage resources better and price their products more competitively.

Read More: Zepto's Dharavi Outlet Faces Suspension Over Food Safety Violations. 

Innovation in Response to Emerging Risks

In addition to process improvements, Sitharaman urged insurers to expand their product offerings to include coverage for new and evolving risks such as cyber fraud. She stressed the importance of creating innovative insurance products that cater to the changing needs of consumers. Diversifying insurance portfolios in alignment with contemporary threats and demands was a major takeaway from the meeting.

Meeting Overview and Participants

The review meeting was chaired by Sitharaman and attended by key officials, including M. Nagaraju, Secretary of the Department of Financial Services. Managing Directors of major public sector insurers such as New India Assurance, United India Insurance, Oriental Insurance, and National Insurance participated in the discussion. 

Representatives from the General Insurance Corporation of India and the Agriculture Insurance Company of India Limited were also present, alongside other senior officials from the Ministry of Finance.

Improving Insurance Penetration and Density in India

Despite steady growth, general insurance penetration in India remains at just 1% of GDP, significantly below the global average of 4.2% recorded in 2023. However, insurance density in the country has seen consistent improvement, rising from $9 in 2019 to $25 in 2023.

Sitharaman reiterated the need for public sector general insurers to focus on increasing both insurance penetration and density to provide broader financial protection.

Performance of the Health Insurance Segment

A detailed five-year analysis of the health insurance sector was presented during the meeting. It revealed a consistent increase in premiums collected by private insurers, standalone health insurers, and public sector companies.

 The incurred claims ratios, which had surged during the COVID-19 pandemic in FY21, reaching 126% for public sector insurers and 105% for private players, have since decreased. By FY24, these figures had moderated to 103% for public sector insurers, 89% for private companies, and 65% for standalone health insurers.

Conclusion

The Finance Minister’s call for AI integration marks a pivotal move towards modernising public sector insurers. Embracing digital tools for claim settlement, pricing, and product innovation is essential for improving efficiency, addressing emerging risks, and enhancing insurance reach across India.

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