How digital distribution shifts the balance of power towards the customer

Few problems test the insurance industry’s promise to its customers as directly as mis-selling. A policy might be sold today but turn out to be an unsuitable recommendation or a misunderstood exclusion several years later. In that sense, mis-selling presents the insurance industry with a problem concerning both conduct as well as timing. The challenge, therefore, is not merely to address grievances once they arise, but to strengthen the checks that can prevent unsuitable recommendations and incomplete disclosures at the point of sale.

As per the IRDAI’s Annual Report 2024-25, over 2.5 lakh customer grievances have been recorded via the Bima Bharosa portal. These figures bring to light the continuing concerns around sales practices and policyholder protection. Digital distribution can help address this at two levels. First, by giving customers greater visibility into the products they are considering, and by making the sales process itself more transparent and accountable. The latter is particularly important in a category where millions of customer interactions take place across multiple products, languages and distribution touchpoints.

The role of digital channels, therefore, is not limited to making policies easier to buy. It is also about helping customers make informed choices and ensuring that the quality of the sale can be monitored.

Making information and comparison more accessible to buyers

The growing use of comparison how consumers approach insurance purchase. Policybazaar data shows that nearly 75% of health insurance buyers compare at least three plans before purchasing. Those who compare pay around 20% less on average, while premiums for similar customer profiles can vary by as much as 70%. In motor insurance, 70-75% of buyers compare at least three plans, with potential savings of around ₹8,000 on older vehicles and up to ₹30,000 on newer ones. The share of term insurance buyers comparing at least three policies has also risen from 32% in 2023 to 41% in 2026.

The significance of this behaviour extends beyond price. Comparing policies allows customers to examine differences in coverage, exclusions, waiting periods, co-payments, and add-on benefits before making a decision. It gives them a clearer basis to question a recommendation and assess whether a product meets their needs. The more informed the buyer, the less the purchase depends on the seller being the sole interpreter of the product.

A suitable policy matters more than a completed sale

The test of a good insurance sale is not whether a policy has been issued, but whether it provides the protection the customer actually needs. This calls for a closer match between a buyer’s circumstances, the cover recommended and what is explained before the purchase. Digital platforms help make this possible by analysing customer requirements, identifying suitable products, and examining sales conversations for gaps in disclosure.

Call transcription and speech analytics can flag whether exclusions, waiting periods and other important conditions have been explained, or whether the recommendation departs from the customer's stated needs. Comparing call transcripts with the information entered in a proposal form can also help identify omissions or discrepancies before a policy is issued.

Policybazaar’s FY24 annual report states that its quality management system allows it to evaluate 100% of telephonic conversations against defined quality parameters and flag potential instances of mis-selling. Such checks are important because digital channels can also scale aggressive or misleading sales practices. Recording and reviewing conversations, checking disclosures and intervening when sales conduct falls short are necessary safeguards. Technology can identify warning signs, but these must be followed by corrective action.

But the responsibility cannot end with identifying a problem. A recommendation that does not fit the customer's needs should be questioned before it becomes a policy; an important exclusion should be explained before a premium is collected. The industry must measure the quality of distribution by the suitability of the cover sold, the clarity of the advice given and the customer's ability to make an informed decision. Digital channels make these standards easier to monitor and enforce.

The customer’s experience does not end with the sale

Mis-selling may not become apparent when a policy is purchased. It can surface much later, when a claim is filed or at renewal, and a customer discovers that an exclusion, waiting period or coverage limit affects the protection they expected. Digital servicing can make it easier to access policy documents, track claims, submit information, register grievances and follow up on unresolved issues.

The first step is to approach the insurer’s Grievance Redressal Officer. If the issue remains unresolved or the response is unsatisfactory, the customer can escalate it through IRDAI's Bima Bharosa portal, where the complaint can be registered and tracked online. If the complaint is not attended to within 15 days of registration on Bima Bharosa, or the resolution is unsatisfactory, the policyholder can approach the Insurance Ombudsman for redressal.

Digital channels make these routes more accessible by allowing customers to submit complaints, upload supporting documents, receive a tracking number and follow the status of their grievance without repeated visits or correspondence. They can also access policy documents and claim-related communication to support their case. At renewal, customers can compare alternatives and, in the case of health insurance, exercise their right to portability if they wish to move to another insurer. The free-look period also gives them an opportunity to review and cancel a policy within the applicable terms.

“The point is that a customer's choice does not end with the purchase. Digital distribution must make it easier not only to buy a policy, but also to question a decision, seek redressal and move on when the cover or service falls short.”

• Jerry Bhutia, Chief Sales Officer, Policybazaar

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