Irdai chairman Ajay Seth has labelled insurers' practice of seeking personal information to provide policy quotes as a 'dark pattern' and commissioned a nine-month study by the Institute of Public Policy to define and track such practices, the regulator announced at an event organised by the Life Insurance Council in Mumbai.
Dark Pattern Definition and Study
In online regulation, 'dark patterns' refer to practices that manipulate users into sharing data or making choices they may not otherwise make, according to Seth. He highlighted the issue with a specific example: "If I need a quote on a term plan, I have to necessarily agree to be educated about products of large insurers. Product discovery is hidden behind a wall of personal data collection."
"Not that everyone is doing this, but it is a concern. If people do not have a choice to know the product, price, and performance freely, how will they take a decision?" – Ajay Seth, chairman, Irdai
Seth stated that Irdai had asked insurers about timelines to comply with norms on avoiding dark patterns, and most companies said they did not have such practices in their online processes. Following this, Irdai has tasked the Institute of Public Policy with conducting a study and monitoring over nine months which entities deploy dark patterns and which do not.
Remarks on Insurance Penetration
Speaking at the event, Seth said the industry must focus on covering the 'missing middle', a large segment that is neither poor nor wealthy. He argued that insurance penetration should be measured by the number of people covered rather than premium as a share of GDP, as the latter can rise through the sale of high-value policies. This marks a shift in metrics that could affect how insurers report growth to regulators and investors.
Shift in Listing Stance
Seth also announced a change in the regulator's stance on insurance company listings. Under former chairman Debasis Panda, Irdai had indicated that once a company achieves scale and age, listing should be a natural progression, as it brings benefits such as better disclosures and more value for policyholders. In contrast, Seth stated: "My view is, go to the market if you need capital, not for transparency. The regulator is capable of making sure that everybody is comfortable with respect to transparency."
| Aspect | Former Chairman Debasis Panda | Current Chairman Ajay Seth |
|---|---|---|
| Listing rationale | Natural progression with scale and age; brings better disclosures and value for policyholders | Driven by promoters' capital requirements; not for transparency |
| Role of regulator | Not specified | Regulator capable of ensuring transparency |
Seth questioned the rationale for selling life insurance to 85-year-olds and said insurance should not be used for estate planning purposes.
Distribution Guidelines
Seth added that the regulator would be releasing distribution guidelines that will define suitability of products. This move is expected to set standards for how insurers sell policies and to whom, potentially impacting product design and marketing strategies.
For finance professionals, these developments signal a regulatory push toward greater transparency in data collection and a recalibration of metrics used to measure industry penetration. The nine-month study on dark patterns may lead to increased compliance costs for insurers found to be in violation, while the shift in listing philosophy could alter capital-raising strategies for insurance companies considering public offerings.
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