Regulatory Frameworks for Artificial Intelligence and Big Data in Insurance Addressing Challenges and Policy Opportunities

Abstract

The insurance sector is being dramatically transformed by big data, artificial intelligence (AI), telematics, wearable technologies, and other alternative data streams. Although these technologies are expected to bring efficiency, risk precision, and fraud detection, they also inherently pose fundamental consumer-protection issues around privacy, transparency, fairness, inclusion, and regulation. This paper critically reviews how big-data-based insurance practices are transforming the Indian insurance market and analyses regulatory measures needed to protect consumer rights. This study, based on regulatory reports of the Insurance Regulatory and Development Authority of India (IRDAI), industry data, and international comparative practices, identifies privacy risks, algorithmic obscurity, indirect discrimination, and market exclusion. It also sees potential for customized products, adaptive risk avoidance, and wider financial inclusion if consumer rights are given proper protection. The article suggests a multi-dimensional regulatory model for India that brings together more robust data governance, algorithmic accountability, fairness auditing, supervisory capacity building, market-structure protections, and consumer empowerment programs. Indian regulatory milestones and policy recommendations are outlined in two tables, and trends in insurance penetration and the emerging insurer data source composition are represented through two figures. The analysis demonstrates that India's singular demographic heterogeneity, regulatory capacity limitations, and fast-growing Insurtech environment necessitate strategies particular to the balance between innovation and social protection. The paper concludes by specifying policy design principles and a research agenda to ensure that India's insurance industry develops in a way that is inclusive, equitable, and resilient in the age of big data.