As India’s insurance industry grapple with rising complaints over mis-selling and claims disputes, regulators advocate for a shift towards institutional and digital distribution channels to boost penetration and modernise sales practices.
India’s insurance market still leans heavily on individual agents, even as regulators warn that mis-selling remains a persistent problem. In its latest annual report, the Insurance Regulatory and Development Authority of India said complaints tied to unfair business practices in life insurance rose 14.3% in fiscal 2024-25 to 26,667 cases, while health insurance grievances jumped 41% to 137,361, largely over claims disputes, delays and partial settlements. The regulator has pressed insurers to examine root causes, test whether products suit customers and tighten oversight of the channels through which policies are sold.
That tension sits at the heart of a broader debate over how insurance should be distributed in a digital economy. The lead argument is that India has modernised payments through public digital infrastructure such as UPI, but has not applied the same logic to insurance, where a human still has to originate each sale. Supporters of a more institutional model say the 2018 POSP reform, which allowed brokers to onboard point-of-sale personnel at scale, was only a partial step because it digitised recruitment rather than the sale itself.
The case for change is strongest where lending, savings and protection already overlap. Large non-bank lenders and microfinance institutions serve customers in hundreds of towns, yet they are still pushed towards building or borrowing fragmented agent networks when they want to bundle loan protection into the customer journey. Advocates of Corporate POSP status argue that banks, NBFCs, MFIs and brokers with proper compliance systems should be able to sell under a regulated institutional framework, with disclosure, suitability checks, grievance handling and audit trails built into the process.
The policy logic is not unique to India. China’s insurance regulator has tried to reduce dependence on lone agents and shift more activity towards institutional and digital distribution, backed by broader digital transformation goals. For India, the argument is especially pointed because insurance penetration remains at 3.7% of GDP, far below the global average of 7.3%, according to the material cited in the debate. The conclusion drawn by proponents of reform is straightforward: if India trusts institutions to move money and manage compliance in payments and banking, it should be willing to extend the same model to insurance.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
