Insurance complaints surge as mis-selling, commission-driven sales take centerstage: Report
Policy mis-selling remained a major driver of disputes, with complaints up 11.2% over Q2 2024. The value of such grievances also rose nearly 10%.
- Sep 25, 2025,
- Updated Sep 25, 2025 8:35 AM IST
Complaints about insurance nearly doubled in the second half of 2025 compared with the first, according to a report released on Wednesday by Insurance Samadhan, a privately run grievance redressal platform. The Q2 2025 Trends Report flagged mis-selling and claim disputes as the most common issues. Complaints rose from 684 in Q1 to 974 in Q2, a 45% increase. The value of contested claims also jumped sharply, from Rs 83.5 crore to Rs 119.5 crore — an increase of more than 43%.
Mis-selling at the core
Policy mis-selling remained a major driver of disputes, with complaints up 11.2% over Q2 2024. The value of such grievances also rose nearly 10%. Health insurance accounted for almost 68% of all complaints, followed by life insurance at 25.5% and general insurance at 6.9%. Endowment policies were the most mis-sold products, leaving policyholders exposed to penalties, lower-than-promised returns, and even capital erosion.
Demographically, individuals aged 31 to 40 were the most likely to file complaints. Uttar Pradesh, India’s most populous state, reported the highest share of grievances, at 16%. “Policyholders, particularly younger generations, are standing up for their rights,” said Shilpa Arora, cofounder and COO of Insurance Samadhan.
Regulatory data also shows the scale of the problem. The Insurance Regulatory and Development Authority of India (IRDAI) reported 2,15,569 grievances on its Bima Bharosa portal in 2023–24, of which 1,20,726 related to life insurance. Alarmingly, 20% of life insurance complaints in 2022–23 were linked to mis-selling. Similarly, the Council for Insurance Ombudsmen received 52,575 complaints in 2023–24, including 31,490 related to health insurance, up 21.7% year-on-year. A deeper analysis of 2022–23 data showed that 58% of entertainable complaints before the ombudsman stemmed from mis-selling.
The commission game
Experts point to commissions as the root cause. A documentary screened by 1 Finance highlighted how the commission structure incentivizes aggressive selling. Research by 1 Finance Magazine found that India’s top 15 banks earned Rs 21,773 crore in commissions in FY24 from selling insurance and other financial products. HDFC Bank led the list with ₹6,467 crore, followed by SBI at Rs 3,893 crore and Axis Bank at Rs 3,320 crore. For some lenders, commissions formed a sizeable share of income — Axis Bank derived 25.2% of its income from commissions, IDFC First 23.6%, and Yes Bank 23.3%.
Experts noted that as much as 65% of the first-year premium can go toward commissions. This encourages agents and bank staff to push high-premium policies — often investment-linked — rather than simpler, cheaper term plans that may be better for customers.
Trapped consumers
A 1 Finance documentary revealed how customers are often misled when dealing with banks, especially while seeking loans. In many cases, loan approvals were tied to mandatory insurance purchases. The underlying problem lies in the incentive structure — from senior managers to frontline agents, sales take precedence over customer needs. People visiting banks for lockers or credit facilities frequently find themselves pressured into buying unnecessary policies. High, front-loaded commissions also fuel “churning,” where agents push clients to surrender old policies and buy new ones purely for fresh payouts. Lax oversight has allowed these practices to persist, trapping customers in unsuitable products.
Systemic consequences
The fallout is severe. Research shows that 43.3% of all benefits paid by the top 10 life insurers relate to surrendered, withdrawn, discontinued, or lapsed policies. The 61-month persistency ratio — a measure of how many policies stay active for five years — is just 51%. In practice, this means nearly half of policies lapse before the fifth year. Customers surrendering policies early often recover only a fraction of premiums, as little as 30% in the second year under IRDAI rules.
A survey by 1 Finance across 20 banks in 15 cities revealed that 57% of relationship managers admitted being instructed to sell financial products regardless of suitability. Such sales pressure creates a culture where targets matter more than the customer’s long-term financial well-being.
Complaints about insurance nearly doubled in the second half of 2025 compared with the first, according to a report released on Wednesday by Insurance Samadhan, a privately run grievance redressal platform. The Q2 2025 Trends Report flagged mis-selling and claim disputes as the most common issues. Complaints rose from 684 in Q1 to 974 in Q2, a 45% increase. The value of contested claims also jumped sharply, from Rs 83.5 crore to Rs 119.5 crore — an increase of more than 43%.
Mis-selling at the core
Policy mis-selling remained a major driver of disputes, with complaints up 11.2% over Q2 2024. The value of such grievances also rose nearly 10%. Health insurance accounted for almost 68% of all complaints, followed by life insurance at 25.5% and general insurance at 6.9%. Endowment policies were the most mis-sold products, leaving policyholders exposed to penalties, lower-than-promised returns, and even capital erosion.
Demographically, individuals aged 31 to 40 were the most likely to file complaints. Uttar Pradesh, India’s most populous state, reported the highest share of grievances, at 16%. “Policyholders, particularly younger generations, are standing up for their rights,” said Shilpa Arora, cofounder and COO of Insurance Samadhan.
Regulatory data also shows the scale of the problem. The Insurance Regulatory and Development Authority of India (IRDAI) reported 2,15,569 grievances on its Bima Bharosa portal in 2023–24, of which 1,20,726 related to life insurance. Alarmingly, 20% of life insurance complaints in 2022–23 were linked to mis-selling. Similarly, the Council for Insurance Ombudsmen received 52,575 complaints in 2023–24, including 31,490 related to health insurance, up 21.7% year-on-year. A deeper analysis of 2022–23 data showed that 58% of entertainable complaints before the ombudsman stemmed from mis-selling.
The commission game
Experts point to commissions as the root cause. A documentary screened by 1 Finance highlighted how the commission structure incentivizes aggressive selling. Research by 1 Finance Magazine found that India’s top 15 banks earned Rs 21,773 crore in commissions in FY24 from selling insurance and other financial products. HDFC Bank led the list with ₹6,467 crore, followed by SBI at Rs 3,893 crore and Axis Bank at Rs 3,320 crore. For some lenders, commissions formed a sizeable share of income — Axis Bank derived 25.2% of its income from commissions, IDFC First 23.6%, and Yes Bank 23.3%.
Experts noted that as much as 65% of the first-year premium can go toward commissions. This encourages agents and bank staff to push high-premium policies — often investment-linked — rather than simpler, cheaper term plans that may be better for customers.
Trapped consumers
A 1 Finance documentary revealed how customers are often misled when dealing with banks, especially while seeking loans. In many cases, loan approvals were tied to mandatory insurance purchases. The underlying problem lies in the incentive structure — from senior managers to frontline agents, sales take precedence over customer needs. People visiting banks for lockers or credit facilities frequently find themselves pressured into buying unnecessary policies. High, front-loaded commissions also fuel “churning,” where agents push clients to surrender old policies and buy new ones purely for fresh payouts. Lax oversight has allowed these practices to persist, trapping customers in unsuitable products.
Systemic consequences
The fallout is severe. Research shows that 43.3% of all benefits paid by the top 10 life insurers relate to surrendered, withdrawn, discontinued, or lapsed policies. The 61-month persistency ratio — a measure of how many policies stay active for five years — is just 51%. In practice, this means nearly half of policies lapse before the fifth year. Customers surrendering policies early often recover only a fraction of premiums, as little as 30% in the second year under IRDAI rules.
A survey by 1 Finance across 20 banks in 15 cities revealed that 57% of relationship managers admitted being instructed to sell financial products regardless of suitability. Such sales pressure creates a culture where targets matter more than the customer’s long-term financial well-being.