Why awareness is the only antidote to mis-selling in insurance

As India's insurance ecosystem continues to scale, the responsibility of protection must be shared, insurers must simplify, platforms must guide transparently, and consumers must engage with curiosity and awareness.

India’s insurance sector is witnessing a duality – a significant spike across the market and an underlying layer of challenges. While market growth can be attributed to rising medical service costs, GST cut-downs, and customised offerings, gaps in understanding insurance products, leading to easy mis-selling and fraudulent activities, are becoming catalysts in aggravating the sector's challenges.

According to the Insurance Development Authority of India's (IRDAI) Annual Report for 2024–25, insurers in India processed over 11.26 crore general and health insurance claims, as well as 26.68 lakh life insurance claims. In response, 2,57,790 policyholder grievances were filed on the Bima Bharosa portal across life, general, and health insurance.

This contrast highlights that while claims volumes are large, disputes largely stem from gaps in product understanding, coverage clarity, and suitability rather than intent alone.

Mis-selling has consequences beyond individual policyholders; it erodes trust in the insurance system. In FY2024–25, complaints classified under Unfair Business Practices (UFBP), which include mis-selling, rose to 26,667, accounting for over 22% of life insurance grievances, up from 19% in the previous year.

Claim denials from unsuitable policies increase disputes, strain grievance mechanisms, and distort risk pools, making insurance more expensive for everyone. This dynamic disproportionately affects first-time buyers, who rely more on guidance at purchase and are more likely to disengage after an adverse claims experience, as reflected in regulator and ombudsman observations.

Now, as an industry, insurance is rebutting the challenge with AI-led guidance, pricing parity across platforms, and focused awareness efforts that help consumers compare, understand coverage, and make better-informed decisions.