Mis-selling in insurance a significant concern: IRDAI, Pg13

Key Highlights:

• IRDAI's annual report highlights mis-selling as a major concern in the insurance sector.
• Grievances against life insurers remained stable at approximately 1,20,429 in 2024-25.
• Unfair Business Practices (UFBP) related grievances increased to 26,667 in 2024-25.
• UFBP grievances now constitute 22.14% of total grievances in FY25.
• Insurance penetration remained static at 3.7% in FY25, significantly lower than the global average of 7.3%.
• Insurance density in India rose from $95 in 2023-24 to $97 in 2024-25.

Detailed Insights:

• Mis-selling involves selling insurance without fully disclosing terms or assessing suitability, leading to policy lapses and higher premiums.
• IRDAI has advised insurers to assess product suitability and implement distribution channel controls to reduce mis-selling.
• The Finance Ministry has cautioned against mis-selling, emphasizing corporate governance in insurance and banking sectors.
• Low insurance penetration indicates a need to expand insurance coverage and awareness in India.
• Life insurance penetration decreased from 2.8% to 2.7% in 2024-25, while non-life insurance penetration remained at 1%.
• Insurance density has shown a consistent upward trend since 2016-17, reflecting a gradual increase in per capita premium.

Key Concepts Involved:

• Mis-selling: Selling insurance products without proper disclosure of terms, conditions, or suitability.
• Insurance Penetration: Percentage of insurance premiums to GDP, indicating insurance sector development.
• Insurance Density: Ratio of premiums to population (per capita premium), reflecting insurance uptake.