Indian Insurance Regulatory and Development Authority of India (IRDAI) in its latest annual report has said that ‘mis-selling’ is a serious concern in the insurance sector and insurance companies need to conduct ‘root cause analysis’ to find out the reason for it. According to the report, the total number of complaints filed against life insurance companies has remained almost constant in the financial year 2024-25. This number was 1,20,726 in 2023-24, which will be 1,20,429 in 2024-25.
22.14 percent increase in total number of complaints registered under UFBP
However, the total number of complaints filed under ‘Unfair Business Practices’ (UFBP) has increased from 23,335 in FY 2023-24 to 26,667 in FY 2024-25. Thus, the share of complaints related to UFBP in the total complaints has increased to 22.14 percent in the financial year 2024-25 as compared to 19.33 percent in the previous financial year. Let us tell you that ‘mis-selling’ in the insurance sector means selling insurance products to customers without providing correct information about the terms, conditions or suitability.
Advice on conducting ‘Root Cause Analysis’ from time to time
“To prevent or reduce mis-selling, insurance companies have been advised to assess the suitability of the product, implement appropriate controls over the distribution channel and have a plan for resolution of mis-selling complaints, including conducting ‘root cause analysis’ from time to time,” IRDAI said in its annual report 2024-25.
Cases of policy closure are increasing due to mis-selling
The Finance Ministry has also repeatedly cautioned banks and insurance companies against ‘mis-selling’ of insurance policies to customers, stressing the importance of maintaining best practices of corporate governance. Due to mis-selling, the premium burden on customers often increases, due to which customers do not renew their policies and cases of policy closure increase.
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