Both life and health insurance need to move from a push model to a pull model, which rests on changes in product structure, incentives and disclosures.

Published on: Aug 19, 2026, 10:01:48 IST

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Ever since its inception, the insurance industry has managed to convince regulators and policy makers that insurance is a push product. The established narrative is that insurance, both life and health, needs very high sales commissions to make reluctant people buy it. The high-commission, no-accountability push model has proved to be unsuccessful with stagnating penetration and rising consumer complaints. The current model is clearly not working. India needs a market structure that turns this push product into a pull one — where consumers see the merit of insurance and the sales network facilitates and services a suitable product.

Despite decades of high-cost distribution, insurance penetration remains stubbornly low — life insurance penetration fell from 2.8% to 2.7% in FY25 over the previous year, while non-life remained flat at 1%. But commissions and sales-related costs for both life and health insurance remain high. In FY25, life insurers paid 18% more commission than the previous year while premium grew only by 6.7%. Worse, the high-commission bearing first-year premium grew by 40% as against a tiny 9% growth in renewal commission. The story is the same in health insurance where privately bought individual health insurance has commission costs of around 25%.

Such high commissions are accompanied with higher customer complaints. Mis-selling complaints against life insurers rose more than 14% in FY25. Complaints against general and health insurers rose 45% and more than two-thirds of these were claim-related. This points to a hard push model focussed on clawing commissions out of the product with little regard for product suitability or consumer outcomes.

A push product needs very heavy marketing and large sales commissions to induce reluctant buyers to get on-board. A pull product is actively sought out by consumers because they recognise the need for it. The utility of a safety belt of medical and life insurance is obvious to middle-class Indians who do not have the security of a government job that comes with pensions and medical covers. But the way the market is structured makes zeroing down on the suitable choice difficult and hazardous. A move from a push to a pull marketplace will solve this problem, with the seller facilitating and servicing the sale of a suitable product. Such a transition needs five preparatory steps.

One, the product has to be cleaned of tricks, traps, unfair costs, and opacity. The product features and structure of both life and health insurance policies are not retail-ready. Potential customers rely on sellers to explain the costs and benefits. Data shows that sellers focus on maximising their commissions rather than customer outcomes. Incentive structures that nudge sellers to do the right thing are a non-negotiable part of this journey.

Two, the underwriting must be done at point of sale and not claim. Underwriting is the process of checking the risk level of the potential customer. It decides the premium, coverage, exclusions, and whether a proposal is to be accepted. But, in a race for collecting business, the underwriting process happens at the point of claim instead of at point of sale, leading to disputes and a loss of trust.

Three, the seller should be made responsible for selling a suitable product and facilitating the claim. A suitable product is one that solves the problem the financial product is being bought for. The industry must ensure it exists to solve consumer problems and not give livelihoods to agents or bonuses to CEOs. For example, selling a recurring premium policy to an FD-seeking investor is a crime and the person doing this must be penalised and barred from the industry. Additionally, the person or company selling the product has be a part of the claim process. The sellers earning very high sales commissions today are free of the responsibility of ensuring a suitable sale and facilitating claims.

Four, disclosures must be relevant. For example, the claims data for mediclaim policies is difficult to access and understand; policy-holders find out the hard way at the point of claim. This should be one of the key disclosures made upfront by the seller. Deeper changes are needed in the way in which current disclosures are made. Even financial experts struggle with comparing polices across multiple companies, so convoluted are the disclosures in both life and medical insurance. Unless they are deliberately trying to mislead, insurance firms should have no trouble in deploying AI to solve the meaningful disclosure problem.

Five, policy-holders should be allowed to rate service providers. If we can rate a delivery boy or an Uber driver or an airline service or hotel, surely we should be able to rate the services of the agent, the hospital, the TPA and the insurer. The first step has already been taken by IRDAI. Starting January 1, 2027, every insurance policy will be tagged to the person who actually sold it. Not the bank or corporate agent, but the person. The aim is to create a digital trail that will make the person selling accountable and traceable. The next step will be to actually use big data to weed out bad agents.

Once these are implemented, a large consumer education campaign has to carry the message of insurance as a mandatory safety belt for the average middle-class Indian. Such steps were taken by the Indian mutual fund industry, where the regulator worked for over 15 years to make the product ready for retail investors before the Mutual Fund Sahi Hai campaign triggered the over 20% average annual growth in the mutual fund industry’s assets under management over the past 10 years — to the point where SIP became a household term.

Medical and life insurance products must be bought before the process of risk-based investment begins. Moving the industry from push to pull may entail a short-term hit to the insurance industry, but will be a long-term gain — for the customer, seller and industry. Why should we not do it?

(Disclosure: The author serves on the Insurance Advisory Committee of IRDAI.)

Monika Halan is the best-selling author of the Let’s Talk series of books on money. The views expressed are personal

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