Insurance mis-selling: IRDAI wants every policy linked to person who sold it
IRDAI has proposed tagging every insurance policy to the individual who sold it instead of only the bank or intermediary. The move aims to improve accountability in insurance mis-selling cases and strengthen consumer protection.
Buying an insurance policy through your bank or an agent may soon come with an added layer of accountability.
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed that every insurance policy be digitally linked to the individual salesperson who sold it. The move is aimed at making it easier to identify who was responsible for selling a policy, particularly in cases where customers allege they were mis-sold an insurance product.
The proposal is part of a wider overhaul of insurance regulations following the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. Along with expanding investment avenues and revising rules for intermediaries, the regulator has proposed several measures to improve transparency, accountability and consumer protection in the insurance sector.
WHAT HAS IRDAI PROPOSED?
Under the draft proposal, every insurance policy would be tagged to the specific individual involved in the sale. This could include a bank employee, insurance agent, broker-qualified person, insurance sales person, authorised verifier or point-of-sale person.
At present, when a policy is sold through banks or corporate agents, the responsibility generally rests with the organisation. If the proposal is implemented, every policy would carry a digital trail identifying the individual seller, making it easier to trace who advised or sold the product.
WHY HAS IRDAI BROUGHT THIS PROPOSAL?
Insurance mis-selling has remained one of the biggest concerns for policyholders.
Many customers have complained of being sold policies that were presented as fixed deposit-like products, guaranteed-return plans or short-term investments, only to later discover lock-in periods, surrender charges, exclusions or market-linked risks.
According to the draft proposal, tagging every policy to an individual seller is intended to improve traceability and accountability at the point of sale. If a customer later raises a complaint, insurers and intermediaries would be able to identify who sold the policy and examine whether the product recommended matched the customer's requirements.
The proposal, however, does not mean that every complaint of mis-selling will automatically be accepted. The outcome will still depend on policy documents, disclosures, benefit illustrations and other records maintained during the sale.
HOW WILL THIS HELP POLICYHOLDERS?
For insurance buyers, the biggest benefit is likely to be greater accountability.
Instead of responsibility being limited to the insurance company or the bank, there would be a clear record of the individual who handled the sale. This could make it easier to investigate complaints and establish what was explained to the customer at the time of purchase.
The proposal could also encourage better documentation during the sales process, with greater emphasis on explaining premium commitments, policy exclusions, waiting periods, lock-in conditions and surrender rules before a policy is issued.
WHAT CHANGES FOR BANKS AND INSURANCE INTERMEDIARIES?
If implemented, banks, insurance agents, brokers and other intermediaries may have to strengthen their sales processes.
The proposal is expected to increase supervision of frontline sales staff and improve documentation so that the advice given to customers can be verified later if required.
For banks, where insurance products are often sold alongside regular banking services, this may also reduce confusion among customers who sometimes assume insurance products offer the same liquidity or guarantees as bank deposits.
Apart from seller tagging, IRDAI has also proposed a shift from fixed-term licences to a perpetual registration regime for intermediaries such as brokers, corporate agents, third-party administrators, surveyors and web aggregators. These registrations would remain valid subject to payment of an annual fee.
The regulator has also proposed increasing the maximum penalty for violations to Rs 10 crore from the current Rs 1 crore to strengthen enforcement.
WHAT SHOULD BUYERS STILL KEEP IN MIND?
While seller tagging could make the sales process more transparent, it does not eliminate the need for customers to do their own checks before buying an insurance policy.
Policyholders should carefully understand whether the product is a protection plan, savings plan, pension product or market-linked insurance.
They should also verify the premium payment term, exclusions, waiting periods, lock-in period, surrender value, early exit charges and whether returns are guaranteed or linked to market performance. Any verbal assurance should always be matched against the official policy document.
Customers should also keep copies of proposal forms, benefit illustrations and payment receipts, and use the free-look period to review the policy after it is issued. If the policy differs from what was promised during the sale, concerns should be raised immediately within the permitted time.
If implemented, IRDAI's proposal could mark a significant change in how insurance policies are sold in India. By linking every policy to the individual who sold it, the regulator hopes to make the sales process more transparent and improve accountability, while giving policyholders a clearer trail to follow if disputes arise in the future.
Buying an insurance policy through your bank or an agent may soon come with an added layer of accountability.
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed that every insurance policy be digitally linked to the individual salesperson who sold it. The move is aimed at making it easier to identify who was responsible for selling a policy, particularly in cases where customers allege they were mis-sold an insurance product.
The proposal is part of a wider overhaul of insurance regulations following the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. Along with expanding investment avenues and revising rules for intermediaries, the regulator has proposed several measures to improve transparency, accountability and consumer protection in the insurance sector.
WHAT HAS IRDAI PROPOSED?
Under the draft proposal, every insurance policy would be tagged to the specific individual involved in the sale. This could include a bank employee, insurance agent, broker-qualified person, insurance sales person, authorised verifier or point-of-sale person.
At present, when a policy is sold through banks or corporate agents, the responsibility generally rests with the organisation. If the proposal is implemented, every policy would carry a digital trail identifying the individual seller, making it easier to trace who advised or sold the product.
WHY HAS IRDAI BROUGHT THIS PROPOSAL?
Insurance mis-selling has remained one of the biggest concerns for policyholders.
Many customers have complained of being sold policies that were presented as fixed deposit-like products, guaranteed-return plans or short-term investments, only to later discover lock-in periods, surrender charges, exclusions or market-linked risks.
According to the draft proposal, tagging every policy to an individual seller is intended to improve traceability and accountability at the point of sale. If a customer later raises a complaint, insurers and intermediaries would be able to identify who sold the policy and examine whether the product recommended matched the customer's requirements.
The proposal, however, does not mean that every complaint of mis-selling will automatically be accepted. The outcome will still depend on policy documents, disclosures, benefit illustrations and other records maintained during the sale.
HOW WILL THIS HELP POLICYHOLDERS?
For insurance buyers, the biggest benefit is likely to be greater accountability.
Instead of responsibility being limited to the insurance company or the bank, there would be a clear record of the individual who handled the sale. This could make it easier to investigate complaints and establish what was explained to the customer at the time of purchase.
The proposal could also encourage better documentation during the sales process, with greater emphasis on explaining premium commitments, policy exclusions, waiting periods, lock-in conditions and surrender rules before a policy is issued.
WHAT CHANGES FOR BANKS AND INSURANCE INTERMEDIARIES?
If implemented, banks, insurance agents, brokers and other intermediaries may have to strengthen their sales processes.
The proposal is expected to increase supervision of frontline sales staff and improve documentation so that the advice given to customers can be verified later if required.
For banks, where insurance products are often sold alongside regular banking services, this may also reduce confusion among customers who sometimes assume insurance products offer the same liquidity or guarantees as bank deposits.
Apart from seller tagging, IRDAI has also proposed a shift from fixed-term licences to a perpetual registration regime for intermediaries such as brokers, corporate agents, third-party administrators, surveyors and web aggregators. These registrations would remain valid subject to payment of an annual fee.
The regulator has also proposed increasing the maximum penalty for violations to Rs 10 crore from the current Rs 1 crore to strengthen enforcement.
WHAT SHOULD BUYERS STILL KEEP IN MIND?
While seller tagging could make the sales process more transparent, it does not eliminate the need for customers to do their own checks before buying an insurance policy.
Policyholders should carefully understand whether the product is a protection plan, savings plan, pension product or market-linked insurance.
They should also verify the premium payment term, exclusions, waiting periods, lock-in period, surrender value, early exit charges and whether returns are guaranteed or linked to market performance. Any verbal assurance should always be matched against the official policy document.
Customers should also keep copies of proposal forms, benefit illustrations and payment receipts, and use the free-look period to review the policy after it is issued. If the policy differs from what was promised during the sale, concerns should be raised immediately within the permitted time.
If implemented, IRDAI's proposal could mark a significant change in how insurance policies are sold in India. By linking every policy to the individual who sold it, the regulator hopes to make the sales process more transparent and improve accountability, while giving policyholders a clearer trail to follow if disputes arise in the future.
