Overview

Indian consumers have already integrated conversational AI into financial interactions. ServiceNow’s Customer Experience Report indicates that 80 % of Indian consumers use AI chatbots for tasks such as checking complaint status, obtaining product recommendations and accessing self‑help guides, while 78 % specifically use chatbots when reviewing investment options. Car insurance, a legally mandatory third‑party motor insurance product for every vehicle owner, is now part of this habit.

Consumer Adoption and Behaviour

A 2026 study published in the International Journal of Bank Marketing surveyed 245 experienced insurance‑chatbot users in India. The research found that trust in the chatbot significantly influences both first‑time adoption and continued use. Ease of use and perceived usefulness were strong predictors of adoption intentions, with respondents valuing convenience and multi‑channel accessibility. Although perceived risk reduced trust, it did not stop usage, reflecting a calculated, risk‑tolerant mindset where users accept possible errors and assume verification responsibilities.

Typical Queries

Service teams report that most consumer questions are definitional rather than price‑focused. Common queries include:

  • Meaning of Insured Declared Value (IDV) and who determines it.
  • Difference between third‑party and comprehensive cover.
  • Whether engine damage caused by water‑logging is covered.
  • Impact on no‑claim bonus after a small claim.
  • Justification for specific add‑on costs.

These questions historically went unasked because insurance terminology in India is dense, agents are consulted mainly at renewal, and policy documents are rarely read in full. AI chatbots eliminate the social cost of asking basic questions and can provide answers 24/7.

Strengths and Limitations of AI Chatbots

AI excels at decoding jargon, such as explaining depreciation, IDV, or total‑loss thresholds in plain language, thereby enabling customers to negotiate renewals more effectively. However, chatbots cannot access individual policy details such as a customer’s specific no‑claim bonus, claims history, geographic zone classification, or the insurer’s current rate filings. Add‑on names and inclusions lack standardisation across insurers, so a chatbot’s generic description may be inaccurate for a particular policy. Moreover, because chatbots draw on publicly available material, the answer may reflect the insurer whose content is most visible online rather than the product best suited to the consumer.

> "Customers are arriving at the renewal conversation far better informed than they were years ago, and they are arriving with sharper questions. That is good for the industry. Our job is to make sure the answer they get from us matches the policy document, because the document is what outlines what the claim will actually cover," – Gaurang Thosani, Head – Digital Marketing & eBusiness, Royal Sundaram.

Regulatory Developments

On 18 June 2026, the Insurance Regulatory and Development Authority of India (IRDAI) constituted a seven‑member working group on artificial intelligence, chaired by Sandeep K. Shukla, Director of IIIT Hyderabad. The group’s mandate is to assess the extent of AI deployment by regulated entities and to develop the sector’s first formal governance framework covering ethical, transparent and explainable AI use, with claims processing and fraud detection identified as priority areas. The framework will govern insurers’ internal AI applications and does not extend to third‑party chatbots that consumers may consult independently.

Practical Guidance for Consumers

  • Use AI to formulate questions, not to draw conclusions; treat it as a research assistant.
  • Verify every specific claim against the actual policy wording and schedule, not against a brochure or summary.
  • Check the IDV on the quote yourself, as it influences both premium and payout.
  • Confirm price‑bearing elements such as no‑claim bonus, deductible and add‑on inclusions directly with the insurer before purchase.

> "An AI tool can explain what zero depreciation means. It cannot tell you whether your specific policy includes it, what your no‑claim bonus is worth this year, or how your claim will be settled. Those answers sit in your policy schedule, and that is still the document customers should read," – Gaurang Thosani, Royal Sundaram.

Outlook

The key takeaway for car owners is that AI should be leveraged for understanding product concepts rather than for confirming the terms of an individual contract. Insurers such as Royal Sundaram that publish policy wordings and add‑on details alongside quotes facilitate quick verification. As conversational tools become standard in policy research, consumers who use them to ask better‑structured questions will derive the greatest benefit.

Disclaimer: The above press release comes to you under an arrangement with NRDPL. PTI takes no editorial responsibility for the same.