Irdai Warns: Insurance Misselling Soars, Policy Lapses Rise

The Insurance Regulatory and Development Authority of India (Irdai) has highlighted misselling as a significant issue within the insurance sector. In fiscal year 2024-25, grievances related to unfair business practices (UFBP) increased to 26,667, representing 22.14% of total complaints, up from 19.33% in the prior year. This trend is concerning as misselling, which involves selling policies without proper disclosure, often results in policyholders facing higher premiums and subsequently lapsing their policies.

To combat this, Irdai has advised insurers to implement strategies such as assessing product suitability and enhancing controls within distribution channels. A root cause analysis of misselling grievances is also recommended periodically. Despite these concerns, the overall insurance penetration in India remained static at 3.7% for FY25, lagging behind the global average of 7.3%. Life insurance penetration even saw a slight decline to 2.7%.

However, insurance density in India experienced a modest increase, reaching $97 per capita in FY25, up from $95 the previous year. This upward trend in density, a measure of premiums relative to population, has been consistent since fiscal year 2016-17. The report underscores the importance of these metrics in assessing the development of the insurance sector.