IRDAI Pushes Insurers Toward Customer-First Selling: What Policy Buyers Should Check Before Signing

According to reporting by theprint.in, the Insurance Regulatory and Development Authority of India (IRDAI) wants insurance to be chosen by customers rather than pushed onto them, and is looking to place the policyholder at the centre of how products are designed and sold. The reporting frames the problem as insurance that is sold, not chosen.

For you as a buyer, this points to a future in which sellers may have to explain products more clearly and match them better to your needs. The specific rules are not spelled out in the headline, so treat this as a direction of policy, not a finished change. Until details arrive, your best protection is to ask pointed questions before you pay a premium.

This article explains the background to the issue, what could change for policy buyers and borrowers, and a practical checklist you can use today. Everything about the regulator's intent is attributed to the original reporting; the rest is standing background on how insurance buying works in India.

Key takeaways

• IRDAI, per theprint.in, is pushing for a customer-centred approach so that insurance is chosen on need, not sold on persuasion.
• The headline does not give specific rules, deadlines or penalties, so no new right or cost should be assumed yet.
• Mis-selling usually shows up as a product that does not match the buyer's goal: savings plans bought as protection, or cover bundled with a loan.
• Before signing anything, check the need, the total premium over the policy term, the exit cost and the free-look rights.
• If a loan officer links the loan to an insurance purchase, compare the premium separately and ask whether it is optional.
• Complaints can be raised first with the insurer and then escalated to the regulator's grievance channels.

What does it mean when insurance is sold, not chosen?

In a market where insurance is chosen, a buyer starts with a need: income protection for a family, a hospital bill buffer, cover for a vehicle. They compare products and pick the cheapest one that does the job. In a market where insurance is sold, the starting point is the seller's target. The product that earns the highest commission or helps meet a quarterly number is the one that gets proposed, whether or not it fits the buyer.

This is a long-standing concern in Indian personal finance, not a new discovery. Policies that mix investment and cover are harder to compare than pure protection, and buyers often do not realise the cost of leaving early. Bundled sales through bank branches and loan counters add another layer, because the buyer may feel the loan approval depends on taking the policy.

The theprint.in headline suggests the regulator is treating this as a conduct problem to be fixed at the point of sale. How it will do so, through disclosure, suitability checks, incentive rules or something else, is not stated in the headline, and we do not guess.

How insurance regulation works in India

IRDAI is the statutory regulator for life, health and general insurers. It frames rules on product approval, disclosure, claim settlement, grievance handling and the conduct of intermediaries such as agents and brokers. Its stated objective, in broad terms, is the protection of policyholders alongside orderly growth of the sector.

Several standing protections already exist for buyers:

1. Free-look period: after receiving a policy document, you have a limited window to review it and return the policy if you disagree with the terms. The length depends on the product and the rules in force, so check your policy document.
2. Disclosure of key terms: benefits, exclusions, charges and the surrender value basis must be set out in documents you receive.
3. Grievance channels: every insurer has a complaints process, and unresolved complaints can be escalated through the regulator's grievance systems and the insurance ombudsman.
4. Claim-related timelines: insurers are expected to act on claims within prescribed periods.

A customer-centric push would likely build on these, but the detail matters. A disclosure rule changes what you see. A suitability rule changes what can be sold to you. A commission rule changes what a seller is paid to recommend. Each has a different effect on your wallet.

What could change for policy buyers

Since the headline does not give details, the following describes the kinds of change that a customer-first approach could involve, so you know what to watch for in the final rules. None of these should be assumed to be confirmed.

Area	How it often works today	What a customer-first approach could mean
Product explanation	Long brochures, benefit illustrations with assumptions	Plainer summaries of cost, benefit and exit terms
Suitability	Buyer often relies on the seller's advice	Clearer link between the buyer's need and the product
Early exit	Surrender charges that can be steep in early years	Greater clarity on what you lose before you buy
Bundled sales	Insurance offered at loan or account counters	Clearer line that insurance is optional
Complaints	Insurer first, then escalation	Easier, faster resolution paths

Read the table as a watch list. When the rules are published, check which row they touch and whether they are mandatory or merely encouraged.

Worked example: why the product choice matters in rupees

The numbers below are illustrative, built from simple arithmetic, and are not quotes for any real product.

Suppose a buyer is persuaded to take a savings-linked policy with a premium of ₹50,000 a year. After three years they cannot continue and the policy is surrendered. They have paid 3 x ₹50,000 = ₹1,50,000. If the surrender value in that early period were, say, 30% of premiums paid (a hypothetical figure), they would get back ₹45,000 and lose ₹1,05,000 compared with the cash they put in. Surrender terms vary by product and year, and some policies pay less or more, which is exactly why you must ask for the figure before buying.

Now compare the purpose. If the buyer's real need was protection for the family, a pure term plan is designed for that single job and is usually far cheaper than a savings-linked plan for the same cover. The remaining money can go into instruments the buyer controls and can withdraw from without a surrender penalty. The point is not that one product is always right; it is that the need should decide the product.

Insurance bundled with loans: a separate trap

Borrowers meet insurance at another point: the loan counter. Credit-linked insurance, meant to cover the outstanding loan if the borrower dies or is disabled, is sometimes offered as a single premium that is added to the loan amount. That raises the amount you borrow and the interest you pay on it.

Here is a simple example. Take a ₹10,00,000 personal loan for 36 months at 12% a year. The monthly EMI is about ₹33,214. If a ₹30,000 single premium is added, the loan becomes ₹10,30,000 and the EMI rises to roughly ₹34,210, an increase of about ₹996 a month. Over 36 months that is about ₹35,860 extra, so you pay about ₹5,860 in interest on top of the ₹30,000 premium itself. You can test your own numbers with the EMI calculator.

Two questions settle most bundling cases: is the insurance optional, and could you buy equivalent cover elsewhere at a lower price? If the loan approval seems to depend on the policy, ask for that condition in writing. Guides on personal loans cover what to check in a loan offer before you accept.

Who is affected and who is not

• First-time buyers: most affected, because they rely most on the seller's explanation and have the least experience of exit costs.
• Borrowers offered bundled cover: affected at the point where the loan and the policy are sold together.
• Existing policyholders: their contracts stay as written. New norms are unlikely to rewrite old policies, though better disclosure may help them understand what they hold.
• Informed buyers who already compare term and health plans: least affected, since they already choose rather than get sold.
• Insurers and intermediaries: affected in how they present products and are paid, depending on the final rules.

What to do now: a buyer's checklist

You do not need to wait for new rules to buy more carefully. Use this checklist before paying any premium:

1. Write down your need in one sentence: income protection, medical cover, vehicle cover or a savings goal.
2. Ask for the total premium over the full policy term, not just the yearly amount.
3. Ask what you receive if you stop after year two, year five and at maturity, in rupees.
4. Separate cover from investment. If a product mixes both, ask how much of the premium goes to each.
5. Check exclusions and waiting periods for health and critical illness plans.
6. Never let insurance decide a loan. Check your own position with an eligibility check and compare the loan on its own terms.
7. Use the free-look window to read the whole document after you receive it, and return the policy if it does not match what you were told.
8. Keep a record of who sold the policy and what they told you, in messages if possible.

Follow developments on the news hub as more detail on the regulator's plans is reported.

Common mistakes and the outlook

The most common mistake is buying to save tax or to please a relationship manager rather than to meet a need. The second is ignoring the exit cost. The third is signing a form without reading the declarations about health or income, which can later affect a claim.

As for the outlook, a regulator signalling a customer-first approach is a positive direction, but the effect on buyers will depend on specific, enforceable requirements. Watch for three things: whether disclosure formats become simpler, whether incentives for sellers change, and whether there are clear consequences for mis-selling. Until those appear in published rules, treat your own questions as the main safeguard.

Frequently asked questions

What did IRDAI reportedly say about customer-centric insurance?

According to reporting by theprint.in, IRDAI wants to put the customer back at the centre of insurance, so that policies are chosen rather than sold. The headline does not give the specific measures, so details should be confirmed from the regulator's own publications once released.

Does this change my existing insurance policy?

No change to your existing contract should be assumed from this report. Your policy terms, premiums and surrender conditions stay as written. You can, however, review your policy now and ask the insurer to explain anything you do not understand.

Can a lender force me to buy insurance with a loan?

A loan offer that depends on buying a particular insurance policy deserves a hard look. Ask whether the cover is optional and get the answer in writing. Compare the premium and the added interest if it is financed within the loan, and consider cover from another source.

How do I complain if I think a policy was mis-sold?

Start with a written complaint to the insurer and keep the reference number. If the reply is unsatisfactory or delayed, you can escalate through the regulator's grievance channels or the insurance ombudsman. Keep your policy documents and any messages from the seller.

Is a savings-linked policy always a bad choice?

Not always. It can suit someone who values the discipline of a long commitment and understands the charges and exit terms. The risk arises when it is bought as pure protection or without knowing what happens on early exit.