IRDAI Flags Mis-Selling as Key Concern in India’s Insurance Sector

In its most recent annual report, the regulator, the Insurance Regulatory and Development Authority of India (IRDAI), stated that mis-selling is a serious issue in the insurance industry and that insurers must carry out a root cause analysis to determine the underlying issues.

According to the report, the total number of grievances filed under UFBP (Unfair Business Practices) increased from 23,335 in 2023-24 to 26,667 in 2024-25, while the total number of grievances filed against life insurers stayed relatively constant at 1,20,429 in 2024-25 compared to 1,20,726 in 2023-24. As a result, the proportion of UFBP grievances to all grievances rose from 19.33% in the previous fiscal year to 22.14% in FY25. Selling insurance products to customers without properly disclosing terms, conditions, or suitability is known as mis-selling.

IRDAI and Government Putting a Strict Scanner on Mis-Selling

In its 2024–2025 annual report, IRDAI said that in order to prevent or lessen mis-selling, insurers have been advised to put strategies into place, such as evaluating product suitability, putting in place controls specific to distribution channels, and creating a plan to handle mis-selling complaints, including conducting a root cause analysis on a regular basis.

The need of maintaining corporate governance best practices has been emphasised by the Finance Ministry's frequent warnings to banks and insurance companies about misselling insurance policies to consumers. Customers who are misled frequently pay higher premiums, which deters policyholders from renewing their coverage and increases the number of lapse instances. According to the data, insurance penetration stayed constant at 3.7% in FY25. This is significantly less than the global average of 7.3%.

Recent Performance of India’s Insurance Sector

Between 2024 and 2025, the life insurance industry's insurance penetration fell from 2.8% the year before to 2.7%. According to the report, the penetration rate in the non-life insurance sector stayed constant at 1% in 2024–2025 as compared to 2023–2024.

India's insurance density increased slightly from USD 95 in 2023–2024 to USD 97 in 2024–2025. In particular, non-life insurance density was constant at USD 25, whereas life insurance density rose from USD 70 to USD 72. According to the research, this increasing trend in insurance density has persisted since 2016–17. Two indicators that are frequently used to evaluate the degree of development of an insurance sector in a nation are insurance penetration and density. Insurance density is determined as the ratio of premiums to population (per capita premium), whereas insurance penetration is calculated as the percentage of insurance premiums to GDP.