A Critical Study Of Regulatory Frameworks For Consumer Protection In Insurance Contracts In India
- IJLLR Journal
- 20 minutes ago
- 3 min read
Langlen Thokchom, LLM, Amity Law School, Noida
ABSTRACT
Insurance mis-selling in India is a problem. It is well documented in the records of the government and the courts but it is not clearly defined in any main laws. This paper looks at the reasons why insurance mis-selling is still happening in India after many years of changes in regulations. It says that the problem is not that there are not rules but that the rules are based on ideas that are not true in the real market. The analysis is done in three parts that are all connected to each other. Insurance mis-selling is an issue that needs to be understood. The paper examines insurance mis-selling to find out why it is still happening. Insurance mis-selling, in India is a problem. The Insurance Act of 1938 the IRDA Act of 1999 and the Insurance Laws Amendment Act of 2015 are all part of the framework. The Insurance Regulatory and Development Authority of India or IRDAI has its set of rules including the Protection of Policyholders Interests Regulations of 2017 and the Master Circular 2024. We need to see how well these laws and rules work together to stop people from selling insurance the way. There are four types of mis- selling: when someone does not tell the truth about what the insurance can do when someone does not tell important facts, when someone sells insurance that is not right for the person and when someone forces someone to buy insurance with other things. We also look at what the courts have said about this from 2016 to 2026. The Supreme Court, the National Consumer Disputes Redressal Commission or NCDRC and other high courts have made decisions that help us understand what insurance companies must tell people who buy insurance. There are still problems that make it hard for people to get help when they are treated unfairly. The way the market works is also a problem.
Insurance agents get paid a lot of money when they sell insurance. People who buy insurance do not always know what they are getting. This is because insurance agents know more about insurance, than the people who buy it. When banks sell insurance there are not enough rules to make sure people are treated fairly. The laws we have do not do a job of dealing with these problems. The main point is that India’s rules to protect policyholders focus on following procedures than on actually helping them. The current system relies on disclosure, considers a signed document as proof that the policyholder agreed to the terms even if they did not really understand what they were signing. This system has some gaps. For example, there is no definition of what is considered mis-selling of insurance policies. Also, there are no rules that insurance intermediaries must follow to ensure the policies they sell are suitable for their customers. As a result, if something goes wrong policyholders do not have a legal case. The paper says that to fix these problems the government needs to make laws. These laws should clearly define what is mis-selling. There should also be a rule that insurance intermediaries must ensure the policies they sell are suitable, for their customers. The way insurance is regulated and interpreted in courts needs to change. The goal is to make sure the rules reflect the situation of how insurance is sold in India. The policyholders and their protection should be the priority. India’s policyholder protection framework should be reformed to prioritize their needs.
Keywords: Insurance Mis-selling, Misrepresentation, Deficiency in Service, Unfair Trade Practice, IRDAI, Policyholder Protection, Suitability Standard, Disclosure Paradox, Intermediary Accountability, Consumer Protection Act 2019, Free-Look Period, Evidentiary Asymmetry, Bancassurance, Commission-Based Distribution, Knowledge Asymmetry.
