The AI Surge Reshaping Insurance and Why Nepal Must Take Notice
Artificial Intelligence is no longer a distant experiment in the insurance world. From underwriting to disaster management, AI is fundamentally transforming how insurance is designed, delivered, and consumed. Globally, the AI-in-insurance market is projected to surge to over USD 25 billion by 2025. The companies driving this transformation are not just tech giants, but a new breed of insurtech innovators—and Nepal, though still developing its digital ecosystem, cannot afford to stay on the sidelines.
In developed markets, insurers like Zurich have started using AI-powered Customer Relationship Management systems that function like Spotify for insurance agents. These platforms analyze vast customer behavior datasets and recommend tailored solutions to agents in real-time, reducing customer wait time by up to 70%. Meanwhile, reinsurers like Swiss Re have launched tools such as Life Guide Scout, which integrates generative AI to assist underwriters in making faster, data-backed decisions while ensuring risk accuracy. These are not pilot programs anymore—they’re embedded into the heart of modern insurance operations.
The adoption of AI is also allowing insurers to offer previously unthinkable coverage. At Lloyd’s of London, a firm called Armilla has begun underwriting insurance against losses caused by generative AI errors—essentially covering the financial consequences of incorrect outputs from chatbots and virtual assistants. As large language models like GPT become mainstream, the need to insure against their failures becomes not only viable, but necessary. This reflects a critical shift: AI is no longer just a back-office tool; it’s a risk vector and a market segment in its own right.
And Why Nepal Must Take Notice?
In Nepal, where insurance penetration remains below 4%, the promise of AI is both profound and practical. Most insurers still rely on paper documentation and face-to-face underwriting. The use of even basic AI—such as OCR for digitising forms or chatbots that support both Nepali and English—could drastically cut costs and improve access. With mobile phone penetration surpassing 150%, AI chatbots delivered via messaging platforms could bridge the communication gap between insurers and rural populations, enabling micro-insurance models for agriculture, livestock, and climate-related risks. These models, powered by weather and satellite data, are already making waves in Africa and Southeast Asia. Nepal has the same opportunity, especially in provinces like Karnali and Sudurpashchim, where financial inclusion is still a work in progress.
Nepali regulators, too, have taken initial steps to modernise. The establishment of the Nepal Insurance Authority (NIA) and reforms under the 2022 Insurance Act provide a governance base. However, AI-specific regulation remains largely unexplored. To avoid the risks of algorithmic bias, data misuse, or non-transparent decision-making, Nepal must begin building ethical AI frameworks tailored to its own demographic, linguistic, and infrastructural realities. Importantly, this will also signal to foreign investors and global reinsurers that Nepal is serious about entering the next phase of insurance innovation.
The success of AI in insurance ultimately depends on more than technology—it hinges on trust, governance, and purpose. Strategic collaborations between insurers, telecoms, fintech startups, and academic institutions can help the country build platforms suited to its unique demographic and geographic context. As climate risks grow and financial inclusion becomes urgent, AI offers tools that are not just efficient but transformative.
The future of insurance will be written in algorithms, not ledgers. If Nepal seizes this moment, it can build a more accessible, resilient, and digitally inclusive insurance ecosystem—on its terms, and with lasting impact.