Winning Bizness Desk
Mumbai. India’s insurance regulator has raised fresh concern over widespread mis-selling in the life insurance sector, warning that misleading sales practices are eroding consumer trust. In its annual report for 2024-25, the Insurance Regulatory and Development Authority of India said complaints against insurance companies remain stubbornly high, with a growing share linked to unfair business practices. The regulator has asked insurers to carry out root cause analysis to identify why customers continue to be misled despite repeated advisories.
Rising complaints worry regulator and ministry
According to the IRDAI report, a total of 1,20,429 complaints were filed against life insurance companies during 2024-25, almost unchanged from 1,20,726 complaints in the previous year. However, complaints related to unfair business practices, including mis-selling, rose sharply. Such cases increased from 23,335 to 26,667 during the year. As a result, the share of mis-selling in total complaints climbed from 19.33 percent to 22.14 percent. The finance ministry has also cautioned banks and insurers against selling unsuitable policies to customers.
What mis-selling actually means for customers
Mis-selling refers to selling insurance policies without proper disclosure, hiding key terms and conditions, or pushing products that do not match a customer’s needs. In many cases, customers realise the problem only after receiving policy documents or when expected benefits do not materialise. The IRDAI noted that such practices damage long-term confidence in insurance products and often lead to policy lapses.
Common ways agents mislead buyers
Mis-selling has reached alarming levels, with companies and agents repeatedly using a few common tactics to trap customers. These include:
- Presenting life insurance as an fd-like product with assured high returns, ignoring its primary role of protection
- Forcing customers to buy insurance as a condition for home or personal loans, which is illegal
- Making attractive verbal promises such as lifetime pension after paying premium for just three years, which are absent in policy documents
These practices often leave customers locked into unsuitable products with little clarity on benefits.
How customers can protect themselves
Experts say policyholders still have tools to protect their interests if they act in time. Key safeguards include:
- Using the free-look period of 15 to 30 days to cancel a policy without giving any reason
- Relying only on written benefit illustrations and policy terms, not verbal assurances
- Approaching the insurance ombudsman online if the company does not resolve complaints
These steps can help customers recover money and avoid long-term losses.
Low insurance penetration adds to challenge
The IRDAI report also highlighted that insurance penetration in India remains low at 3.7 percent, compared to the global average of 7.3 percent. Worryingly, the proportion of people covered under life insurance declined from 2.8 percent to 2.7 percent over the year. The regulator warned that mis-selling discourages renewals, leads to premium defaults and causes policies to lapse, hurting both customers and insurers. It has advised companies to tighten control over agents and banks, review sales practices regularly, and ensure products are sold strictly according to customer needs.
