Regulating Trust: Data Governance, Explainable AI, and the Future of Insurance Innovation

Abstract

This article examines the complex intersection of data governance, explainable artificial intelligence (XAI), telematics, and regulatory frameworks within the contemporary insurance industry. It synthesizes conceptual foundations, governance frameworks, and regulatory imperatives to propose an integrated approach that balances consumer protection with technological innovation. The abstract presents the research objective, methodological orientation, principal findings, and significance. The objective is to analyze how robust data governance and XAI practices—interpreted through international standards, industry guidance, and case-based evidence—can mitigate legal, ethical, and operational risks while enabling value creation through telematics and data-driven underwriting. The methodology is qualitative and integrative: a critical literature synthesis of technical, legal, and management sources combined with normative analysis. Key findings show that (1) XAI enhances transparency and supports regulatory compliance when embedded in a systematic governance framework (Owens et al., 2022); (2) international standards and industry guidance (ISO/IEC, DAMA, Geneva Association) offer compatible but incomplete blueprints that require operational adaptation for insurer contexts (ISO, 2017; DAMA, 2017; The Geneva Association, 2025); (3) telematics introduces granular data opportunities and distinct privacy and fairness challenges that demand both technical controls and targeted regulation (Koppanati, 2024; den Boom, 2023); and (4) AI-powered governance tools can scale oversight but must be governed themselves to avoid reflexive risk (Malviya, 2025). The article concludes by proposing a layered governance model that integrates data quality, XAI, auditability, and regulatory engagement, and by mapping research and practice priorities to support trustworthy, innovative insurance ecosystems. The implications extend to policymakers, insurers, RegTech providers, and academic researchers seeking operational pathways from principle to practice.