A consumer commission in Telangana has ordered a bank and insurer to jointly refund Rs 10 lakh to a 73-year-old retired associate professor, ruling that the policy was issued without her free will or informed consent.

The August 27 ruling by the Hyderabad District Consumer Disputes Redressal Commission, reported by The Indian Express on September 7, 2026, is not an isolated legal matter. It arrives as India’s two principal financial regulators have moved from advisory guidance toward enforceable rules – and as national complaint data shows mis-selling through bank branches is rising.

What the commission found

The complainant visited her bank on September 4, 2023, to transfer funds to her son in the US. Two agents at the branch allegedly told her she was making a one-time investment of Rs 10 lakh, with a promised annual return of Rs 2.67 lakh after four years. They reportedly listed Rs 1 crore as her salary on the proposal form. Her actual pension is Rs 57,000 per month. She alleged bank officials took her signatures on loan documents and placed the funds immediately into a multi-year insurance policy – presented to her as a one-off arrangement. When she sought cancellation, bank officials allegedly told her it could only be done at a future date. That date shifted more than once.

A procedural failure sat at the centre of the ruling. The insurer dispatched the policy documents to the complainant’s permanent address on September 18, 2023, while she was abroad – making it impossible for her to exercise the free-look period, within which a policyholder can cancel a new policy and receive a full premium refund.

The commission stated: “A statutory opportunity cannot be said to be meaningfully provided when the policy document was sent to an address where the complainant was not residing and when she was outside the country at the relevant time.”

The bank denied obtaining signatures on blank documents and argued the transaction was between the complainant and the insurer alone. The insurer submitted that the complainant had accepted the policy without objection and had complied with all Insurance Regulatory and Development Authority of India (IRDAI) guidelines.

The commission rejected both positions, finding each party guilty of deficiency in service and unfair trade practice. It directed the insurer to close the policy and refund the Rs 10 lakh investment and ordered the bank and insurer jointly to pay Rs 50,000 in compensation and Rs 10,000 in costs.

Joint and several liability

The decision to hold both parties jointly and severally liable carries the most direct relevance for anyone in the distribution chain. The ruling confirms that a distributing bank cannot point to the product manufacturer when a sale goes wrong. Both are accountable for what happens at the point of sale.

The commission also found that the complainant, as a 73-year-old retired person, could not be presumed to understand complex insurance terms – and that the obligation to explain those terms clearly rested equally on the bank and the insurer.

Rising complaints, concentrated risk

The Hyderabad ruling sits within a documented national pattern. According to IRDAI’s Annual Report 2024-25, grievances classified under unfair business practices rose to 26,667 in FY25 from 23,335 in FY24 – an increase of about 14% year on year, representing 22.14% of total life insurance complaints, up from 19.33% the year before.

The same report shows the bancassurance channel is where that risk concentrates. Corporate agents, including bancassurance partners, accounted for nearly 53% of private life insurers’ individual new business premium in FY25. Banks alone contributed more than 49%. Direct channels generated just over 10%, while online and web aggregator channels together contributed less than 1%.

The report describes mis-selling as “a significant concern that involves the sale of insurance products to consumers without proper disclosure of terms, conditions, or suitability” – and calls on insurers to conduct root cause analysis rather than resolve complaints case by case.

Speaking at a Confederation of Indian Industry conference in February 2026, IRDAI member (non-life) Deepak Sood addressed the issue directly: “Selling correctly is an imperative for every salesperson, distributor, and insurance company.”

Two regulators tightening the framework

IRDAI standardised the free-look period at 30 days for policies with a term of one year or more, according to India’s Press Information Bureau – up from the 15 days that applied to physical policies at the time of this case. The Hyderabad commission’s finding adds a further dimension: document delivery must be meaningful, not merely technical.

The Reserve Bank of India (RBI) issued draft Commercial Banks (Responsible Business Conduct) Amendment Directions on February 11, 2026, with a proposed effective date of July 1, 2026. Per the text of those draft directions, they would prohibit forced bundling of insurance products with loans, mandate explicit and separate consent for every product sold, and require banks to refund and compensate customers where mis-selling is established. Agents operating inside bank premises would also be required to be clearly distinguishable from bank employees.

The draft directions also formally define mis-selling to include selling a product unsuitable for a customer’s profile, even where explicit consent was given. Under that definition, consent alone would not be a defence if the product was not appropriate for the client.

What the regulator expects

At a November 26, 2025, meeting with chief compliance officers and grievance redressal officers from all insurers, IRDAI chair Ajay Seth framed the issue as one of institutional culture. “Compliance cannot be a department – it must be a mind-set. And grievance redressal cannot be the end of a process – it must be our early warning system. When in doubt, choose the customer,” he said.

For brokers and intermediaries working alongside banking partners, or advising clients who hold bancassurance products, the Hyderabad ruling and the developing regulatory framework define a clear practical test.

Did the customer genuinely understand the product – or did they simply sign? Was the free-look period actually accessible – or was document delivery a formality? Was the product suited to the client’s verified financial profile?

Consumer commissions are applying all three in practice, with financial consequences now shared across the distribution chain.