Agents are luring people by luring them with loan conditions and FD: 1.20 lakh complaints against insurance companies, share of mis-selling is 22.14%

The Insurance Regulatory and Development Authority of India (IRDAI) in its annual report (2024-25) has expressed concern over policy mis-selling in the insurance sector. The regulator directed companies to conduct ‘Root Cause Analysis’ (RCA) to identify the causes.

Mis-selling means selling wrong policies to customers without giving complete information, hiding the terms and conditions or contrary to their requirements. According to the report, the Finance Ministry has also warned banks and insurance companies not to sell wrong policies to customers.

Out of total complaints, 22% cases were related to mis-selling of policies.

According to the IRDAI report, there has been no significant reduction in the total number of complaints filed against life insurance companies.

• FY25 data: A total of 1,20,429 complaints were registered in the year 2024-25, which is almost the same as last year (1,20,726).
• UFBP Complaints: Complaints regarding unfair business practices (UFBP) have increased from 23,335 to 26,667.
• Share increased: The share of cases of misselling of policies in total complaints has increased from 19.33% to 22.14%.

3 big ways of mis-selling to trap people

Mis-selling is not a new thing in the insurance sector, but now it has reached alarming levels. Companies and agents often cheat you in these 3 ways:

• FD scam: Agents sell life insurance as a fixed deposit. They say that in this you will get more returns than the bank, whereas the main function of insurance is to provide security.
• Loan conditions: Many times banks forcibly give an insurance policy instead of giving a home loan or personal loan. This is completely illegal. The borrower can decide whether to take the policy or not.
• False promises: Populist promises like ‘Pay premium for just 3 years and get pension for life’ are made. These are nowhere in the policy papers.

If you have been ‘cheated’, then this is the way to save yourself.

If you feel you have been sold the wrong policy, here’s what you can do…

• Free-Look Period: The biggest weapon of insurance is ‘free-look period’. You can cancel the policy bond without any reason within 15 to 30 days of receiving it. The company will have to refund your entire money (only after deducting the medical test and stamp duty).
• Trust what is written: The agent’s oral promise has no value. Always read the ‘Benefit Illustration’ and terms and conditions of the policy yourself.
• Seek help from the Insurance Ombudsman: If the insurance company does not listen to your complaint, you can file an online complaint with the ‘Insurance Ombudsman’.

Insurance penetration is still low in India

The IRDAI report also states that insurance penetration in India is only 3.7% compared to the world average of 7.3%. It is a matter of concern that the number of people taking life insurance has decreased from 2.8% to 2.7% as compared to last year.

Advice to companies on making effective strategies

The regulator has asked companies to review this problem from time to time. Suggested- Companies should see whether they are offering the right product as per the customer’s need.

Along with this, it has been asked to increase control over distribution channels (such as agents or banks) and develop a concrete plan for redressal of complaints.

Due to mis-selling, customers do not pay the premium and the policy lapses, causing losses to both the insurance companies and the customers.

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