Insurance dark patterns: How customers pay higher premiums and buy unnecessary add-ons online, explain Deloitte India’s Aakash Sharma & Suchintan Chatterjee

What are dark patterns in insurance, and where do customers encounter them while buying policies online?

Dark patterns are design elements within a website or a mobile app that nudge customers into actions they might not have chosen on their own. These sit within the UI or UX of digital platforms. While this concept applies across sectors, we are increasingly seeing it in the insurance sector as more consumers move online to purchase policies.

In terms of where customers encounter them, it can happen at multiple stages. For instance, when a customer first lands on a page, they may be required to enter their mobile number. The moment they do that, it is often taken as consent for communication, including WhatsApp messages. This is what we call a forced action.

Another common point is at the checkout stage. Pre-ticked add-ons may be included even if the customer has not actively selected them, and these get added to the final purchase unless manually removed. This practice is known as basket sneaking. Similarly, a customer may be drawn in by a low premium displayed upfront, only to find that the final premium rises significantly after entering details. That’s a classic case of bait and switch. There are also instances of disguised advertisements, where platforms show messages like “save 23% today”, but when you look at the breakup, a large portion of that saving could simply be due to GST-related adjustments. Along with that, there may be messaging such as “valid only for today,” which creates a sense of false urgency.

How do these practices impact customers financially, and who is most vulnerable to them?

The financial impact depends on the type of pattern. In the case of basket sneaking, where add-ons are pre-selected, the increase in premium may be around 2-5%. Because these are relatively small amounts, many consumers may not notice that they have been added.

However, in bait and switch situations, the difference can be more significant. A policy that is advertised at a low starting price can end up costing substantially more by the end of the process.

In some cases, the final premium can go up five times the initial amount shown, depending on the details filled in by the customer. Any and every consumer can be affected.

It may start with someone who is not digitally savvy, but even otherwise, anyone can end up paying higher premiums or opting for add-ons that are not essential or suitable for them. So this is not limited to a specific category of users.

Why are dark patterns a bigger concern in insurance compared to sectors like e-commerce?

Insurance is fundamentally a trust-based business. Consumers rely on it for protection during some of their most vulnerable moments. If they feel misled or deceived at the first interaction itself, it undermines their confidence in both the product and the organisation.

Also, insurance products are long-term in nature. A decision made at the time of purchase can have financial implications much later, especially at the time of claim. Unlike e-commerce, where a poor experience may just mean returning a product, here the consequences can be more serious.

That is why even small design choices, such as pre-selected add-ons or unclear disclosures,may have a disproportionate impact in insurance.

These practices are more prevalent on insurer websites or on aggregator platforms? What has the regulator asked insurers to do about this?

These practices exist across both aggregator platforms and insurers’ own websites and mobile apps. From an insurer’s perspective, there is an added concern when such patterns appear on aggregator platforms, because they do not have full control over the UI or UX there.

However, there is still a reputational and brand risk for the insurer.

The regulator recently directed insurers to undertake a self-assessment of their digital platforms within 15 days to identify dark patterns. If any such practices are found, they are required to submit an action plan within a month, outlining how they will remove or correct them.

Non-compliance can lead to regulatory action, including penalties under the Consumer Protection Act, 2019.

There have been precedents where the Central Consumer Protection Authority has levied fines for similar breaches, which underscores the seriousness of enforcement.

These tactics often help improve conversions. Do you think removing them will affect insurers’ revenues?

Dark patterns may create short-term revenue opportunities by nudging customers to take certain actions or by increasing add-ons. However, the lifetime value of an insurance customer depends on trust and loyalty.

If that trust is not built at the point of purchase, there is a risk that the customer may not stay with the insurer over the long term. So while these practices may deliver some immediate gains, they can be counterproductive.

From what we are seeing, insurers are taking this seriously. There are already a number of enquiries to understand what dark patterns are, to undertake assessments, and to work on remediation. So, there is movement in that direction, and it is being viewed not just as a compliance requirement but also as an opportunity to build more sustainable customer relationships.

What should consumers keep in mind while buying insurance online to avoid being misled, and where do you see this evolving next?

For consumers, the starting point is to understand what they are buying. Insurance products, whether life or general, are fairly complex and come with multiple riders, terms and conditions. Online journeys often simplify this, but that makes it even more important for consumers to review the details carefully.

They should look at the full premium breakup, check if there are any unnecessary add-ons, and ensure that nothing has been automatically selected without their knowledge. It is also important to check if any auto-debit options have been enabled.

Consumers should avoid making decisions under pressure. Messages such as “valid only for today” or countdown timers are designed to create urgency.

It is better to take time, review the details, and then proceed. If something does not look right, it probably isn’t. In terms of what comes next, this is a logical extension of customer protection efforts.

What started in e-commerce and other digital sectors is now moving into insurance, and we may see similar scrutiny across other financial services as well. The focus is likely to remain on transparency and ensuring that consumers are not misled during digital interactions.