'Rampant' Mis-Selling And Fake Policy Fraud Plague India's Insurance Sector: LIC Executive

India's largest insurance provider LIC noted that massive mis-selling and fraud are rampant in India's insurance landscape even after IRDAI's recent moves to strengthen governing policies.

Ratnakar Patnaik, Managing director at LIC, said that "mis-selling" was "rampant" in several parts of the country, which made him concerned over everyday practices in this sector.

Further, he mentioned that instances had come to light when policies had been sold in the names of individuals who didn't exist.

The wary comes amid proposed stricter accountability for intermediaries to curb mis-selling by the Insurance Regulatory and Development Authority of India (Irdai). 

Complaints, which have been classified as unfair business practices, which include mis-selling, rose to 26,667 in FY25 as against 23,335 in the same period last year, as per Irdai's annual report.

These complaints tally for 22.14% of all grievances against life insurers, up from 19.33% in FY24.

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Meanwhile, he said that several policyholder ink proposal forms without a comprehensive understanding the products they are buying.

On India's large protection gap, he said, the average death claim paid by the industry was slightly over Rs 3 lakh per policy in FY25. On the other hand, LIC's average death claim stood at around Rs 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 pointed that a surge in insurance products that fits the South Asian country's nearly nine million gig workers is a key requisite, indicating an insurance model likened to social security schemes.