Blog Details

Insurance complaints in India have seen a significant rise in the first half of 2025, with mis-selling and claim disputes being at the heart of the problem. A recent report by Insurance Samadhan, a platform that helps policyholders with grievances, highlights these troubling trends and raises concerns about industry practices.

Complaints Nearly Doubled in Six Months

Between the first and second quarters of 2025, the number of insurance-related complaints jumped from 684 to 974, marking a sharp 45% increase. The total money involved in disputed claims also rose substantially from Rs 83.5 crore to Rs 119.5 crore, an increase of over 43%. This shows not only more people are complaining but also bigger financial stakes are involved in these disputes.

Mis-selling Remains a Major Issue

Mis-selling policies to customers has been a key driver behind many of these complaints. Compared to the same period last year, complaints about mis-selling increased by 11.2%, with the value of these grievances climbing by nearly 10%. Health insurance accounts for the majority of complaints, making up around 68%, followed by life insurance at 25.5%, and general insurance at nearly 7%. Among the products, endowment policies are the most commonly mis-sold, often leading to penalties, lower returns, and even loss of capital for buyers.

Who Is Most Affected?

Younger adults, especially those aged between 31 and 40, are the most likely to raise concerns. Geographically, Uttar Pradesh has reported the highest share of complaints, accounting for 16% of all grievances. This trend suggests that consumers, particularly the younger generation, are becoming more aware and proactive about protecting their rights.

Industry Numbers Reflect the Scale

The industry regulator, the Insurance Regulatory and Development Authority of India (IRDAI), recorded over 2.15 lakh grievances in the year 2023-24 through its Bima Bharosa portal. Of these, more than half were related to life insurance. Alarmingly, 20% of complaints about life insurance in the previous year were linked directly to mis-selling. The Council for Insurance Ombudsmen also reported a 21.7% increase in complaints related to health insurance, with 31,490 complaints in 2023-24 alone. Data analysis from 2022-23 revealed that more than half (58%) of cases handled by the ombudsman stemmed from mis-selling.

High Commissions Fuel Mis-selling Practices

Experts point to the insurance commission structure as the root cause. A detailed investigation revealed that banks and insurers earn huge commission amounts, which encourages aggressive sales tactics. In FY24, India's top 15 banks collectively earned Rs 21,773 crore from insurance and financial product commissions. HDFC Bank topped this list with Rs 6,467 crore, followed by SBI and Axis Bank. For some banks, commissions make up a large part of their income, with Axis Bank deriving 25.2% of its earnings from commissions alone.

This situation leads to agents and bank staff pushing high-premium policies, often investment-linked ones, rather than simpler and more affordable term plans that might better serve customers' needs.

Customers Often Trapped

Many customers face pressure, especially when availing loans at banks, to buy insurance policies they don't really need. Loan approvals are sometimes linked to the mandatory purchase of insurance, which benefits the bank’s commission incentives but traps customers in unsuitable products. Sales targets often prioritize pushing financial products over understanding customer needs. Agents also practice "churning"—convincing clients to drop old policies and buy new ones just to earn fresh commissions, leading to financial losses for customers.

Long-Term Consequences

The fallout from these practices is alarming. Data show that almost 43.3% of benefits paid by leading life insurers relate to policies that were surrendered, discontinued, or lapsed. The persistency ratio, which measures how many policies stay active for five years, is only 51%. This means nearly half of policies are dropped before maturity. Early surrender often results in customers recovering as little as 30% of their premiums in the second year, causing significant losses.

A survey of bank relationship managers revealed that 57% admitted their sales targets required them to sell financial products regardless of whether they were suitable for clients, highlighting a sales-driven culture that sacrifices customers’ long-term financial health.

📞 Need immediate help? Reach us at our Contact Page or call us directly at +91 91474 13241

Bimacure – Your Legal Partner in Insurance Disputes.

Disclaimer: Bimacure is an independent legal consulting firm and is not associated with IRDAI or the Insurance Ombudsman in any manner.