IRDAI Flags Mis-selling Complaints Jump 14% In FY25, Asks Insurers To Probe Root Causes

New Delhi, Jan 5 (KNN) Mis-selling continues to be a major concern in the insurance sector, with the regulator urging insurers to probe deeper into the root causes, according to the annual report of the Insurance Regulatory and Development Authority of India (IRDAI).

Unfair Business Practice Complaints Rise Sharply

While the total number of grievances against life insurers remained broadly unchanged at 1,20,429 in FY25 compared with 1,20,726 in the previous year, there was a rise in complaints related to Unfair Business Practices (UFBP). 

Grievances under UFBP increased to 26,667 in FY25 from 23,335 in FY24, raising their share in overall complaints to 22.14 percent from 19.33 percent earlier.

Mis-selling typically involves selling insurance products without adequate disclosure of terms, conditions or suitability for customers.

Regulatory Measures to Address Mis-selling

IRDAI said insurers have been advised to assess product suitability more rigorously, introduce distribution channel-specific controls and develop structured plans to address mis-selling-related grievances. 

These measures include conducting periodic root cause analysis, the regulator said in its annual report for 2024-25.

The regulator noted that mis-selling often results in customers paying higher premiums, which in turn leads to lower policy renewals and an increase in policy lapses, adversely affecting both consumer trust and sector stability.

Insurance Penetration Remains Below Global Average

On sector development indicators, insurance penetration in India remained unchanged at 3.7 percent in FY25, well below the global average of 7.3 percent. 

Life insurance penetration declined marginally to 2.7 percent from 2.8 percent a year earlier, while non-life insurance penetration stayed flat at 1 percent.

Insurance Density Shows Modest Improvement

Insurance density improved slightly to USD 97 in FY25 from USD 95 in FY24. Life insurance density rose to USD 72 from USD 70, while non-life insurance density remained unchanged at USD 25. 

IRDAI noted that insurance density has shown a consistent upward trend since 2016-17.

Insurance penetration measures premiums as a share of GDP, while insurance density reflects per capita premium spend, the report explained.

(KNN Bureau)