IRDAI Orders Insurers To Remove Misleading Online Practices Within 15 Days

Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers and online aggregators to detect and remove "dark patterns" from their platforms within 15 days based on findings from a survey carried out by LocalCircles across the nation.

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According to LocalCircles, which gathered over 87,000 responses across 341 districts, more than 80% of consumers reported encountering misleading design practices while purchasing insurance online. The regulator has also asked companies to submit a compliance report and a time-bound action plan within one month to ensure alignment with guidelines issued by the Central Consumer Protection Authority (CCPA), which classifies such practices as unfair trade practices.

Survey Highlights Widespread Consumer Issues

The LocalCircles survey identified various issues encountered by consumers. Around 80% of the participants noted difficulty in canceling purchased insurance policies, compared to 61% over the last two years. Nearly 90% complained of persistent communication even after opting out.

Moreover, about 85% of the participants complained about unnecessary disclosure of personal data, whereas around 82% noted discrepancies in prices/insurance terms mentioned in ads and the actual product.

Regulatory Actions and Compliance Timeline

As per IRDAI, insurers are required to undertake self-assessment of digital interfaces to identify practices affecting consumer choice. This involves making it hard for users to cancel an offer, imposing hidden costs on users, or encouraging them to take certain actions that they were not supposed to take.

Under the new regulation, the insurers must follow CCPA standards and refrain from designing their digital interfaces in ways that are deceitful to users. Before that, in 2026, RBI too had drafted guidelines, mandating banks to eliminate deceptive digital practices before July 2026.

Limited Reaction Seen in the Insurance Stocks

There was limited impact seen on April 7th on the shares of the insurance companies with SBI Life Insurance, HDFC Life Insurance, and ICICI Prudential Life Insurance being traded in a band of 0.3%-1%.

Impact On Consumers And Industry

It was found that these practices have resulted in financial losses, renewals, and lack of transparency in insurance policies. Also, consumers faced certain problems regarding privacy as they received unauthorized contact and shared data.

According to IRDAI, insurance companies need to be transparent and user-friendly in order to give customers the ability to make wise choices about their policies without getting influenced by any design tricks. This step is intended to regulate the digital processes of insurance companies for the protection of consumers.

This initiative makes insurance firms and aggregators accountable for implementing changes within a set time period.