The Reserve Bank of India (RBI) has raised a red flag over the rising number of customer complaints in the general insurance sector. According to the latest Financial Stability Report (FSR), there are serious concerns regarding how claims are managed and how products are explained to customers. The RBI warned that if these issues are not fixed, it could lead to people losing faith in the insurance system. This loss of trust might cause people to cancel their policies, which would create a big risk for the entire financial market.

The numbers in the report are quite alarming for the general insurance industry. Complaints have nearly tripled in just a few years. In the financial year 2021-22, the numbers were much lower, but they jumped to 1.78 lakh complaints in 2025-26. This sharp increase suggests that companies are struggling with 'claims management' (the process where a company pays the customer for a loss) and 'service quality'. The RBI believes these are systemic problems, meaning they are happening across the whole industry.

While general insurance is struggling, the life insurance sector has shown a much better performance. Complaints in life insurance actually dropped from 1.5 lakh in 2021-22 down to 1.2 lakh in 2025-26. The report says this happened because life insurance companies improved their 'market conduct' (how they behave with customers) and made sure they were selling the right products to the right people. This decline in complaints helps reduce 'reputational risk' (the risk of losing money because people think badly of the company).

For bank officers who also sell insurance products as part of 'bancassurance' (banks selling insurance), this report is very important. It shows that customers are unhappy with how general insurance claims are settled and how the products are communicated. If a bank sells a policy and the customer has a bad experience during a claim, it can damage the bank's relationship with that customer. Bankers must be careful to explain the terms and conditions clearly to avoid 'product communication' issues.

The IRDAI (the insurance regulator in India) is already taking steps to fix these problems through the Insurance Ombudsman. In 2025-26, the Ombudsman resolved 41,055 complaints. Interestingly, 79 percent of these cases were decided in favor of the policyholders. This shows that many customer complaints were valid and the companies were at fault. The regulator is now pushing for faster solutions to problems that have been stuck for a long time.

General insurance companies have been told to focus on four main areas. These include complaints that have been pending for more than 90 days, delays in registering new complaints, and increasing the use of video conferencing for hearings. The goal is to make the process faster and more transparent for the common man. If the industry does not improve, the RBI fears that 'policy persistence' (the rate at which customers keep renewing their policies) will fall significantly.

In the coming months, bank officers and insurance agents should watch for stricter rules from IRDAI regarding claims. There will likely be more pressure on companies to prove they are treating customers fairly. For those aspiring to join the banking sector, understanding these 'conduct risks' is essential. It shows that banking is not just about numbers, but also about maintaining the trust of the public through good service and clear communication.