New Delhi | January 4, 2026 | India’s insurance industry is often projected as a cornerstone of long-term savings and financial security. However, ground realities are becoming increasingly complex. The latest annual report of the Insurance Regulatory and Development Authority of India (IRDAI) has raised serious questions about the functioning of insurance companies. While the total number of complaints against life insurers has remained largely unchanged, grievances linked to mis-selling and Unfair Business Practices (UFBP) have risen sharply.
According to the regulator’s data, life insurance companies recorded 120,726 complaints in FY 2023–24. In FY 2024–25, the figure dipped marginally to 120,429. At first glance, this stability may appear reassuring. A closer look, however, tells a different story. Complaints related to UFBP increased from 23,335 to 26,667 during the same period. As a result, the share of mis-selling in total complaints rose from 19.33% to 22.14%, highlighting a growing structural concern within the sector.
What mis-selling really means
Mis-selling goes beyond simply providing incorrect information. It includes selling insurance policies without adequately assessing a customer’s actual needs, risk profile, or financial capacity. In many cases, critical aspects such as returns, lock-in periods, charges, risk exposure, and long-term premium obligations are either poorly explained or masked by attractive sales pitches.
IRDAI’s report notes that the consequences for customers are significant. When a policy does not align with a buyer’s financial situation or expectations, policyholders often struggle to continue paying premiums. Within a few years, many such policies lapse, leading to financial loss for customers and weakening overall confidence in the insurance system.
Regulator’s firm message
The regulator has issued a clear warning to insurance companies: meeting sales targets alone is not enough. IRDAI has stressed that insurers must ensure policies are genuinely suitable for customers before selling them.
The report advises insurers to take concrete steps, including:
- Making customer suitability assessments mandatory before issuing policies
- Exercising strict oversight over all distribution channels, including agents, bancassurance partners, and digital platforms
- Conducting regular audits and internal reviews to identify the root causes of recurring complaints
The finance ministry, too, has repeatedly cautioned banks and insurers against compromising customer interests and corporate governance standards.
The uncomfortable truth about insurance penetration
The report also underlines the limited reach of insurance in India. In FY 2024–25, insurance penetration—measured as the ratio of total premiums to GDP—remained stuck at 3.7%, well below the global average of 7.3%.
Life insurance penetration declined from 2.8% to 2.7%, while non-life insurance penetration stayed flat at 1%. On the positive side, insurance density—per capita premium—rose modestly from $95 to $97. Experts see this as a sign that spending by insured individuals is increasing, but the stagnation in penetration suggests that insurance coverage is still failing to reach large sections of the population.
A sector on trial
IRDAI’s findings make it clear that the biggest challenge facing India’s insurance sector is maintaining customer trust. If mis-selling is not effectively addressed, the volume of complaints is likely to rise further, slowing the pace of insurance expansion.
The regulator’s message is unambiguous: without transparency, accountability, and customer-centric sales practices, sustainable growth in the insurance industry will remain elusive. The coming months will reveal whether insurers treat this warning as an opportunity for reform—or allow the trust deficit to deepen further.
About the author — Suvedita Nath is a science student with a growing interest in cybercrime and digital safety. She writes on online activity, cyber threats, and technology-driven risks. Her work focuses on clarity, accuracy, and public awareness.
