Cracking Down on Mis-selling: A Call for Reform in India's Insurance Sector

Mis-selling in the insurance sector is a pressing issue. Irdai urges insurers to identify root causes of grievances, which have slightly increased. The Finance Ministry warns against mis-selling, emphasizing corporate governance. Although insurance penetration remains low, there's a gradual rise in insurance density in India.

Mis-selling in the insurance sector has emerged as a pressing concern, with the Insurance Regulatory and Development Authority of India (Irdai) urging insurers to conduct in-depth analyses to identify and address root causes. According to its latest annual report, grievances related to unfair business practices (UFBP) have notably increased.

In 2024-25, the share of UFBP grievances rose to 22.14%, up from 19.33% in the previous fiscal year. To counter this, Irdai has advised insurers to implement strategic measures, including product suitability assessments and targeted controls for specific distribution channels.

Despite repeated warnings from the Finance Ministry about the risks of mis-selling, the practice often results in customers facing higher premiums and increased lapse cases. While insurance penetration in India remains low at 3.7%, the insurance density has seen a consistent upward trend since 2016-17, reflecting gradual growth in the sector.

(With inputs from agencies.)