India’s insurance sector can improve compliance, claims processing and customer outcomes by deploying agentic artificial intelligence across the insurance value chain, according to Saurabh Bhattacharya, Additional Executive Director, Centre for Smart Governance (CSG), Karnataka. He said AI should augment, rather than replace, human decision-making in the sector.
AI Across The Value Chain
Bhattacharya said the government-backed Centre for Smart Governance has been working with public sector bodies on digital governance initiatives and is also contributing to work around the insurance regulatory ecosystem. He said the organisation has examined how AI can be applied to transform insurance processes while retaining human oversight in critical decisions.
“Our focus has been mostly on how AI can be used, and at a larger level technology, but at a specific level, AI can be used to transform this industry,” Bhattacharya said.
He said India’s insurance penetration remains well below the global average, arguing that expanding insurance coverage is important for long-term economic growth. According to him, financial protection enables individuals to manage uncertainty and take greater entrepreneurial and financial risks, which can contribute to economic activity over time.
“Insurance is one instrument which can provide that backing. If you are insured, your health is insured, you know that your financial liabilities are covered. I’m more comfortable taking that risk,” he said.
Rethinking Risk And Compliance
Bhattacharya said the insurance ecosystem has become increasingly complex, involving insurers, brokers, agents, third-party administrators, hospitals and surveyors. At the same time, emerging risks such as climate-related losses, cyberattacks and financial fraud have increased regulatory expectations, making compliance significantly more demanding for insurers.
He said much of the industry’s manual work, including document verification, underwriting support and claims assessment, could be delegated to AI agents capable of analysing structured and unstructured data. However, he stressed that final decisions should continue to rest with human professionals exercising independent judgement.
“AI is not replacement. We don’t look at it as a replacement, but we see it as an augmenting force. At the top still remains that one ultimate thing, which is the human judgement,” he said.
According to Bhattacharya, AI agents could verify customer identity, perform Know Your Customer (KYC) and anti-money laundering (AML) checks, analyse medical records where permitted, identify fraud indicators and prepare recommendations for claims settlement. Such systems, he said, could reduce processing time while improving consistency and accuracy.
Customer Expectations Drive Change
He also said insurers face growing pressure from customers whose expectations are shaped by digital experiences across industries rather than by insurance alone. Faster service delivery, seamless digital interfaces and quicker resolution of claims are increasingly becoming standard expectations for policyholders, requiring insurers to modernise operational processes.
“People don’t compare industry to industry. They compare the service they receive with the best digital experience available to them,” Bhattacharya said.
Bhattacharya said analysis of complaints submitted through the insurance grievance portal, Bima Bharosa, suggested that mis-selling remains among the most significant issues reported by policyholders. He said AI-driven product suitability assessments could help reduce inappropriate policy sales by matching products more closely with customer requirements.
He added that AI could also change regulatory compliance by shifting monitoring from periodic, retrospective reviews to continuous transaction-level verification. Instead of identifying compliance gaps after they occur, intelligent systems could evaluate transactions in real time and support regulators and insurers in meeting evolving governance requirements.
“Compliance has to happen not in a retrospective manner, but in a prospective manner. We are looking at a system where compliances are baked into the entire process,” Bhattacharya said while speaking at BW Festival of Fintech 2026 in New Delhi.