FM directs public insurers to adopt AI, expand portfolios for new risks

FM asks state-run insurers to tackle emerging risks like cyber fraud, diversify products, use AI for pricing and claims, improve penetration and transform digitally

Union Finance Minister Nirmala Sitharaman on Wednesday directed insurance companies to develop innovative products tailored to new and emerging risks, including cyber fraud, and to diversify their product portfolios in line with evolving consumer needs.

 

“The importance of robust underwriting practices and portfolio optimisation was also highlighted, with instructions to align combined ratios with global industry benchmarks to safeguard profitability and financial stability,” said a finance ministry statement.

 

Sitharaman chaired a review meeting of public sector general insurance companies (PSGICs) in New Delhi. The meeting was attended by Secretary, Department of Financial Services (DFS), M. Nagaraju, and the managing directors of New India Assurance, United India Insurance, Oriental Insurance, National Insurance, General Insurance Corporation of India (Reinsurance), and Agriculture Insurance Company of India, along with other senior officials from the Ministry of Finance. 

 

The Finance Minister also directed PSGICs to promptly address customer grievances, strengthen social media engagement, and ensure seamless integration with the Account Aggregator system, including end-to-end digital Know Your Customer (KYC) processes.

 

“To expand market reach and strengthen service accessibility, PSGICs were encouraged to pursue strategic collaborations with intermediaries, fintechs, and insurtech firms. These partnerships are expected to reinforce the nationwide presence of PSGICs and deepen insurance penetration across demographics,” the statement said.

 

She also emphasised the importance of leveraging advanced data analytics and artificial intelligence to develop precise pricing models and efficient claims modelling—essential for improved risk assessment and long-term sustainability.

 

“The PSGICs have been instructed to implement these directions in a time-bound manner. Regular reviews will be conducted to monitor progress and ensure the achievement of intended outcomes,” the statement added. 

 

During the meeting, the Finance Minister reviewed key performance indicators including premium collections, insurance penetration and density, and incurred claims ratios.

 

The total premium collected by PSGICs has risen notably from around ₹80,000 crore in 2019 to nearly ₹1.06 trillion in 2025. The overall general insurance industry also recorded growth, with total premium collections reaching ₹3.07 trillion in FY25.

 

While general insurance penetration in India remains low at 1 per cent of GDP—compared to a global average of 4.2 per cent in 2023—insurance density has steadily improved, increasing from $19 in 2019 to $25 in 2023.

 

The Finance Minister underscored the need for PSGICs to improve both penetration and density to ensure broader financial protection.

 

She also stressed the urgent need for digital transformation across all PSGICs to enhance service delivery and operational 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.