Mis-selling continues to be a major concern in the insurance sector, with the regulator asking insurers to identify and address the root causes, according to the latest annual report of the Insurance Regulatory and Development Authority of India (Irdai).

The report noted that grievances against life insurers remained largely unchanged at 1,20,429 in 2024–25 compared to 1,20,726 in 2023–24. However, complaints related to Unfair Business Practices (UFBP) rose sharply from 23,335 in 2023–24 to 26,667 in 2024–25. As a result, the share of UFBP grievances in total complaints increased to 22.14 per cent in FY25 from 19.33 per cent a year earlier.

Mis-selling typically involves selling insurance policies without proper disclosure of terms, conditions or suitability to customers. To curb this, Irdai has advised insurers to strengthen product suitability assessments, introduce distribution channel–specific controls and develop structured mechanisms to address mis-selling complaints, including periodic root cause analysis.

The Finance Ministry has also repeatedly cautioned banks and insurance companies against mis-selling, stressing adherence to sound corporate governance practices. Mis-selling often leads to higher premiums and dissatisfaction, resulting in policy lapses and lower renewal rates.

On sector performance, insurance penetration in India remained static at 3.7 per cent in FY25, significantly lower than the global average of 7.3 per cent. Life insurance penetration declined marginally from 2.8 per cent to 2.7 per cent, while non-life penetration stayed unchanged at 1 per cent.