The mis-selling package in the consultation paper has four teeth. Suitability becomes enforceable, with a documented needs analysis and audit trail for life sales above a set ticket size, and a customer signature does not absolve the seller of responsibility for an unsuitable product. The identity of the person who sold the policy is tagged to that policy, extending the salesperson-tagging regime IRDAI already announced for 2027. Mis-selling incidents go into the public domain as part of that person's performance record, visible to future recruiters and prospective customers. And the commission is clawed back where a sale is established as mis-sold, so remuneration does not stay with the distributor by default.
Context: the practices the paper names
The draft does not stop at principles. It lists specific practices that would attract disincentives or regulatory action: presenting endowment or savings policies as fixed deposits, particularly in bank-led distribution; selling a regular-premium product as single-premium; selling regular-premium policies without explaining discontinuation consequences and low surrender values; selling term cover to people outside working age or without dependents; and selling ULIPs to risk-averse or elderly customers without explaining mortality charges and capital risk. It also brings all remuneration, direct or indirect, monetary or non-monetary, inside the definition of commission and proposes banning volume-linked or reward-linked incentives for bank and NBFC employees, naming foreign trips, luxury gifts, milestone bonuses and contest rewards as conflict creators.
Implication: what this does to the sales conversation
- For sellers: a mis-sold policy stops being a revenue event and becomes a future liability against both income and reputation, which changes the calculus on marginal sales.
- For banks: the incentive structure that made insurance a volume target inside branch scorecards is explicitly ruled out.
- For policyholders: an individual accountability record eventually replaces the institution-only complaint trail, and premium payments should be direct from the customer's own bank account, UPI or card rather than through third parties.
Action: what to check before you sign
Ask who exactly is selling the policy and note their name and registration. Keep the needs-analysis or quote record the agent shows you, and if the product recommended differs from what you are sold, ask why in writing. If a policy was sold to you as a deposit or without explaining surrender value, that complaint has a route today through the insurer's grievance cell and the IRDAI Bima Bharosa portal; the proposed framework would additionally put the incident on the seller's public record. The rules remain proposals until the consultation closes on October 25, 2026.