Why insurance buyers must organise

The insurance industry's predatory practices demand a collective response from customers

The pattern is as predictable as it is depressing. Someone posts on social media about being deceived by an insurance seller, and within hours, the thread becomes a repository of similar horror stories. A recent example involved a woman who discovered that what she thought was a term insurance policy was an expensive endowment plan, sold to her through clever misdirection about "returns" and "benefits." The responses that followed painted a familiar picture: dozens of people sharing tales of being misled, overcharged, or sold products that bore no resemblance to what they needed.

What strikes me most about these recurring episodes isn't the individual details – though they're invariably galling – but the common thread that runs through them all. In every single case, there's a stark asymmetry between the seller and the buyer that goes far beyond mere knowledge. The insurance agent or company representative has likely conducted this particular dance of deception hundreds, if not thousands, of times. They've perfected the art of steering conversations away from inconvenient questions, of using technical jargon to confuse rather than clarify, and of exploiting the buyer's trust and financial anxiety.

The buyer, meanwhile, is navigating this treacherous terrain perhaps for the first time in their life, or at most the second or third time. They approach the transaction with reasonable expectations: that the person across the table will honestly explain what they're buying, that the product will do what it claims to do, and that the price will be fair. These expectations, reasonable though they are, make them vulnerable to an industry that has built its business model around exploiting exactly this naivety.

This isn't merely an extreme case of caveat emptor. What we're witnessing is a systematic failure of regulation and corporate governance that has persisted for decades. IRDA has had ample time and opportunity to address these predatory practices, yet they continue unabated. The corporate governance failure is even more glaring. Insurance companies are fully aware of what their agents are doing in the field. They design their incentive structures to reward exactly the kind of behaviour that leads to these complaints. Higher commissions for ULIPs and traditional policies compared to term insurance aren't an accident – they're a deliberate strategy to maximise profits at the expense of customer welfare. When the inevitable complaints surface, companies hide behind the fiction that these are isolated incidents caused by rogue agents, while continuing to operate systems that virtually guarantee such outcomes.

After observing this dynamic for years, I've reached an uncomfortable conclusion: the usual prescriptions for reform — better regulation, industry self-discipline, and consumer awareness campaigns — are insufficient. These approaches have been tried for decades without meaningful change. The fundamental problem is that individual consumers, approaching insurance purchases infrequently and with limited expertise, will always be at a disadvantage when facing an industry optimised for extraction rather than protection.

What might work instead is something the insurance industry would find far more threatening: organised buyer power. Imagine if insurance customers could pool their collective knowledge and bargaining strength in the same way that the industry pools risk. Such an organisation could take many forms – online communities that share experiences and warn about specific practices, group purchasing arrangements that bypass traditional distribution channels, or collective action that makes the true cost of predatory behaviour visible to companies and regulators alike.

The technology certainly exists for such an organisation. The same social media platforms that currently serve as repositories for complaints could become tools for coordination and collective action. Buyers could share not just their grievances but their strategies for dealing with insurance sellers, and create databases of reliable vs problematic agents and companies.

This isn't about becoming militant or unreasonable. It's about recognising that when individual consumers repeatedly find themselves outmatched by professional manipulators, the solution may lie in collective rather than individual action. The insurance industry has spent decades perfecting its asymmetric advantage over customers. Perhaps it's time for customers to develop some asymmetric advantages of their own.

The question is whether enough people recognise the need for such an organisation, and whether they're willing to move beyond simply sharing complaint stories to actually building something that changes the balance of power. What do you think? Is organised buyer action a realistic solution, and if so, what should it look like? I’m waiting to hear from you.

For more columns by Dhirendra Kumar, click here.

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