Rampant mis-selling and fraud are plaguing parts of the life insurance industry, even as the insurance regulator moves to tighten rules governing how policies are sold, a top executive at Life Insurance Corp. of India (LIC) said on Tuesday.
"There have been reports of rampant mis-selling of life insurance and fraud in some pockets of the country. We are really worried," Ratnakar Patnaik, managing director at LIC, said at the 71st Foundation Day seminar of the Insurance Institute of India.
Patnaik said there were instances where policies had been sold in the names of non-existent people, with claims settled years later. He said his comments were limited to the life insurance industry.
The concerns come as the Insurance Regulatory and Development Authority of India (Irdai) has proposed stricter accountability for intermediaries to curb mis-selling.
According to the Irdai's annual report, complaints classified as unfair business practices, which include mis-selling, rose to 26,667 in FY25 from 23,335 a year ago. Such complaints accounted for 22.14% of all grievances against life insurers, up from 19.33% in FY24.
Protection gap
Patnaik said many policyholders sign proposal forms without fully understanding the products they are buying.
He also pointed to India's large protection gap. The average death claim paid by the industry was a little over ₹3 lakh per policy in FY25, while LIC's average death claim stood at around ₹2.4 lakh. India's sum assured in force was only about 22% of GDP as of March 2025, compared with nearly 200% in some developed markets, he said.
Patnaik also called for insurance products tailored to the country's nearly 9 million gig workers, suggesting an insurance model similar to social security schemes. He added that medical inflation, which has remained at 14-15% for nearly two decades, continued to pose challenges for health insurance.
Industry outlook
Speaking at the same event, R. Doraiswamy, chief executive officer and managing director of LIC, said the insurance industry collected premium income of ₹11.96 trillion in FY25 and managed assets worth ₹74.44 trillion, citing the Irdai annual report. The industry issued 41.84 crore policies during the year, but insurance penetration remained at 3.7%.
Doraiswamy said the industry's risk landscape was changing as health, climate and cyber risks became more prominent.
"Insurance is moving from being a product purchase to being a resilience decision," he said.
He cited the Economic Survey 2025-26, which highlighted rising claims and high distribution costs, and referred to Swiss Re estimates projecting 6.9% annual real premium growth between 2026 and 2030.
Both executives said the move to allow 100% foreign direct investment in the insurance sector and the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, could help attract capital and expertise to expand insurance coverage in India, where Patnaik estimated more than 90 crore people remain uninsured or underinsured.
