IRDAI Cracks Down on Insurance Misconduct: Committees Formed to Investigate Mis-selling and Claim Settlement Issues
India’s insurance regulator IRDAI has constituted dedicated panels to probe mis-selling practices and irregularities in claim settlements. The move signals stronger consumer protection and transparency in the insurance sector.
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IRDAI Cracks Down on Insurance Misconduct: Committees Formed to Investigate Mis-selling and Claim Settlement Issues
New Delhi | July 21, 2025 — In a significant step towards strengthening consumer protection and regulatory oversight in India’s rapidly growing insurance sector, the Insurance Regulatory and Development Authority of India (IRDAI) has constituted multiple probe panels to examine widespread allegations of mis-selling and claim settlement irregularities by insurers and intermediaries.
The formation of these expert committees comes in response to rising complaints from policyholders, watchdog groups, and financial ombudsman bodies, calling into question the ethical practices of agents, brokers, and even some large insurers in India.
A senior IRDAI official stated: “We are committed to ensuring fairness and transparency. These committees will independently assess reported patterns of misrepresentation and delay or denial of legitimate claims.”
Why the Investigation Now?
The Indian insurance market has seen tremendous growth in recent years, with life insurance and general insurance penetration climbing due to rising financial awareness and digital platforms. However, this expansion has also led to unethical practices, including:
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Selling unsuitable products to senior citizens or low-income individuals
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Bundling policies with loans or mutual funds without full disclosure
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Delays or denials in claim settlements due to technical loopholes
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Lack of clarity in policy terms, leading to disputes during the claims process
Recent complaints lodged on the Bima Bharosa portal and reports from consumer forums like Moneylife Foundation and Consumer Voice India have highlighted several red flags, prompting IRDAI to act swiftly.
Committees and Their Mandates
IRDAI has announced two main expert panels:
1. Mis-Selling Investigation Committee
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Focus: Probes into misleading sales practices, unethical agent commissions, cross-selling abuses, and false guarantees.
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Members: Insurance industry veterans, retired judges, and consumer protection experts.
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Mandate: Review sales data from the past five years and submit actionable recommendations by October 2025.
2. Claim Settlement Oversight Committee
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Focus: Irregular claim rejections, delays beyond timelines specified in IRDAI regulations, and grievances from health, motor, and life insurance policyholders.
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Members: Representatives from IRDAI, public insurance companies, and legal advisers.
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Mandate: Submit a detailed sector-wide audit report by December 2025.
Both panels are expected to hold public hearings and invite whistleblower disclosures through official channels.
For policyholders wishing to submit complaints, IRDAI’s Grievance Redressal Portal has a dedicated submission form under the “Investigative Committees” section.
Industry Response and Public Sentiment
While the move has been widely applauded by consumer rights advocates, some industry stakeholders are expressing concerns about overregulation.
Rashmi Agarwal, Chairperson of the Insurance Brokers Association of India (IBAI), said:
“We welcome the scrutiny, but it's also important not to create fear among frontline agents. What’s needed is more clarity in product design and disclosure norms.”
Policyholders, however, see this as a long-overdue reform. Several affected individuals have voiced their frustration over years of bureaucratic delays in resolving claims, especially in health and life insurance policies.
How Widespread Is Mis-selling in India?
According to an April 2025 study by the National Insurance Academy, over 22% of surveyed policyholders claimed they were unaware of key terms in their purchased insurance plans. More than 17% admitted they were pushed into buying policies under pressure or misinformation.
Notably, private sector insurers have seen a higher volume of complaints on platforms like Bima Sugam and RTI queries, especially in tier-2 and tier-3 cities where financial literacy remains low.
Legal and Regulatory Backdrop
IRDAI's renewed focus aligns with amendments made to the Insurance Act, 1938, under the Finance Bill 2024, which granted more autonomous power to the regulator in appointing independent review panels.
The authority has also revised timelines under its Claim Settlement Regulations (2024), mandating settlement or rejection of claims within 30 days from the submission of final documentation.
For an in-depth review, refer to IRDAI’s Official Circular on Regulatory Committees.
Implications for the Insurance Industry
1. Greater Accountability
Insurers will be under greater scrutiny, particularly in their agent incentive structures and claim handling protocols.
2. Stronger Consumer Protection
With a regulatory crackdown, policyholders can expect better grievance redressal, transparency in documentation, and fairer treatment.
3. Shift Towards Digitization
Digital sales platforms like Policybazaar, ACKO, and Digit Insurance may benefit as they are subject to automated compliance and documentation trails, making mis-selling less likely.
What’s Next?
IRDAI is expected to release a mid-term progress report from both panels by November 2025, which may recommend tighter norms on:
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Agent training and certification renewal
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Disclosure templates in vernacular languages
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Independent ombudsman reviews for high-value claim disputes
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AI-powered red flag systems for insurer behavior patterns
Policyholders, especially those who feel misled or wronged in the past five years, are encouraged to reach out via the official complaint portals and ensure their voices are heard in the ongoing investigation.
Final Thoughts
The formation of these investigation committees marks a turning point for India’s insurance regulation. As the market grows more complex, regulators must balance innovation and efficiency with ethics and protection.
With IRDAI stepping in decisively, the message is clear: the era of unchecked mis-selling and opaque claim practices is drawing to a close. For insurers, it's time to rebuild trust—policy by policy.
