Archive · 2 Jan 2026
RBI Flags Concerns Over High-Cost Strategies in Insurance Sector
The Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (Irdai) are worried about how insurance companies in India are spending a lot of money to get new customers.
This is making insurance more expensive and could cause problems in the future.
The RBI says that insurance companies need to spend less money and use technology to make insurance more affordable.
At the same time, there has been an increase in complaints about insurance companies selling the wrong products to people.
The number of people covered by health insurance has gone up, but the number of policies sold has slightly decreased.
The RBI and Irdai want insurance companies to focus on making insurance more affordable and ensuring that people get the right products.
RBI and Irdai flagged concerns over high-cost distribution strategies in the insurance sector, which could impact long-term sustainability.
Misselling grievances against life insurers rose by 14.3% year-on-year to 26,667 in FY25.
Total premium income grew to ₹11.9 lakh crore in 2024-25, but growth rates for life and non-life sectors have slowed sharply.
Health insurance covered 580 million lives in FY25, with premiums growing by 9.12% year-on-year to ₹1.17 trillion.
RBI and Irdai advised insurers to rationalize costs, align intermediary incentives with policyholder value, and adopt low-cost distribution models.
- Who
- Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (Irdai)
- What
- Flagged concerns over high-cost distribution strategies and misselling grievances in the insurance sector
- When
- Fiscal Year 2024-25
- Where
- India
- Why
- To address structural pressures and ensure long-term sustainability and consumer value in the insurance sector
Insurance Companies
Regulatory Bodies (RBI, Irdai)
Expense Structure
Insurance Companies
Insurance companies argue that high acquisition costs are necessary for customer acquisition and retention in a competitive market.
Regulatory Bodies (RBI, Irdai)
RBI and Irdai believe that high expense structures could weaken profitability and amplify cyclical vulnerabilities, advocating for cost rationalization.
Misselling Grievances
Insurance Companies
Insurance companies may attribute the rise in misselling grievances to increased reporting and awareness rather than systemic issues.
Regulatory Bodies (RBI, Irdai)
Regulatory bodies view the rise in misselling grievances as a significant concern, requiring root cause analysis and measures to address underlying causes.
- Total Premium Income (2024-25)
- ₹11.9 lakh crore
- Total Premium Income (2020-21)
- ₹8.3 lakh crore
- Growth Rate Slowdown
- Sharp slowdown in growth rates for both life and non-life sectors
- Misselling Grievances (FY25)
- 26,667 (up 14.3% from FY24)
- Overall Grievances (FY25)
- 120,429 (marginally down from 120,726 in FY24)
- Lives Covered Under Health Insurance (FY25)
- 580 million
- Health Insurance Premiums (FY25)
- ₹1.17 trillion (up 9.12% YoY)
- Net Incurred Claims (FY25)
- ₹84,850 crore (up 11% YoY)
- Incurred Claims Ratio (FY25)
- 86.98% (down from 88.15% in FY24)
- Average Amount Paid Per Claim (FY25)
- ₹28,910
