Insurance Mis selling in India: Study Finds 63% Customers Distrust Agents, IRDAI Tightens Rules
Upstox survey reveals commission-driven sales practices
New RBI and IRDAI regulations aim to protect policyholders
By Business Reporter
New Delhi: March 02, 2026:
A recent Upstox study has revealed that 63% of customers believe insurance agents prioritize commissions over customer needs. This finding has reignited concerns about mis selling in India’s insurance sector, where agents often push unsuitable or misleading policies to maximize their earnings.
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The issue has drawn attention from regulators, policymakers, and consumer rights groups. The Insurance Regulatory and Development Authority of India (IRDAI), along with the Reserve Bank of India (RBI), has introduced stricter rules to curb mis-selling and protect policyholders.
What is Mis-Selling in Insurance?
- Definition: Mis-selling occurs when insurance products are sold without proper disclosure, when benefits are exaggerated, or when unsuitable policies are recommended.
- Examples:
- Selling long-term policies to elderly customers who may not benefit.
- Forcing home loan borrowers to buy unnecessary insurance.
- Misrepresenting returns on unit-linked insurance plans (ULIPs).
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Key Findings of the Upstox Study
- 63% Customers Distrust Agents: Majority believe agents prioritize commissions.
- Lack of Transparency: Customers feel policy terms are not explained clearly.
- Need for Digital Awareness: Many respondents prefer online platforms for clarity and transparency.
Laws and Rules Against Mis-Selling
1. IRDAI Regulations
- Insurance Bill 2025: Tightens norms on commission disclosures and conflicts of interest.
- Mis-Selling Regulations 2026: Strengthened to prevent misleading sales and protect customers.
- Annual Report 2024–25: Recorded over 26,000 complaints linked to unfair business practices, showing rising mis-selling cases.
2. RBI Draft Rules (2026)
- Proposed framework for banks and financial institutions to ensure suitability checks before selling insurance or financial products.
3. Consumer Protection Act, 2019
- Provides remedies for consumers misled by false claims or unfair practices.
4. Finance Ministry’s Stand
- Finance Minister Nirmala Sitharaman criticized banks for forcing unnecessary insurance on loan borrowers, calling it exploitative.
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Why Mis-Selling Persists
- High Commissions: Agents earn more from certain products, leading to biased recommendations.
- Low Awareness: Customers often lack knowledge of insurance terms.
- Pressure Sales: Banks and agents push policies aggressively to meet sales targets.
Broader Implications
- For Consumers: Mis-selling leads to financial loss and inadequate coverage.
- For Insurers: Damages trust and reputation in the market.
- For Regulators: Rising complaints highlight the need for stricter enforcement.
- For Policymakers: Transparency and digital platforms can reduce mis-selling risks.
Conclusion
The Upstox study highlights a deep trust deficit between customers and insurance agents in India. With 63% of customers believing agents prioritize commissions, regulators are stepping up to protect policyholders. The IRDAI’s new mis-selling regulations, the Insurance Bill 2025, and RBI’s draft rules represent a strong push towards transparency and accountability.
For consumers, awareness and scrutiny of insurance products remain the best defence against mis-selling. For insurers, rebuilding trust through ethical practices is essential to sustain growth in India’s booming insurance market.
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