The missing link in insurance: Informed agents, engaged consumers

Insurance is built on trust, but trust cannot survive where knowledge is thin. Our survey of consumers and agents shows that India’s insurance ecosystem suffers not from intent but from gaps in understanding.

The findings expose a deeper issue: agents who are expected to interpret long-term savings instruments often struggle with their most basic financial concepts such as returns, inflation and policy structures. This knowledge deficit silently multiplies through every sale, creating an industry-wide cycle of poor advice, misplaced expectations and consumer regret.

The first gap: weak conceptual understanding

A recent survey by Fingrowth Media with Upstox involving 750 life insurance consumers and agents across 20+ cities in India revealed that 57% of agents admit they don’t fully understand IRR (Internal Rate of Return), the very metric that determines how a customer’s money actually grows over time. Only 16% “always” explain IRR or real returns to clients. When the advisor does not grasp how charges, bonuses or inflation shape real outcomes, every projection risks turning misleading even if unintentionally.

Equally concerning, only 31% of agents know the difference between real and nominal returns. This leads to an overreliance on headline (nominal) numbers and the habitual downplaying of inflation’s long-term erosion.

The typical agent-consumer conversation stays trapped in absolute numbers and insurance coverage amounts rather than return: the discussion usually centers on “15 years cover”, “your nominee will get ₹X” and “you will receive ₹Y at maturity,” with the entire investment side framed as lump-sum outcomes instead of return percentages.

As a result, the insurance benefit gets explained in detail while the savings component is treated like an add-on, with little or no discussion on IRR, charges, bonus variability or inflation-adjusted (real) returns—so customers walk away believing they’re buying a wealth-building product, when in many cases they’re only being shown a future number, not the actual growth rate that gets them there.

The result: products are presented as wealth builders when, in reality, they may just preserve value only.

Ofcourse one can argue that insurance is not an investment product and so, why should the agent be aware of these products? The fact is, insurance continues to be sold as an investment product and so, it becomes critical that agents are able to explain these basiic terms.

The second gap: misplaced confidence and false assurance

The mismatch between what agents believe and what consumers actually understand is stark. While 89% of agents believe their clients fully understand what they purchased, more than half of those consumers were never told that missing a renewal premium could lead to a loss of principal.

This overconfidence stems from familiarity bias, agents assume repeated product exposure equals comprehension. In reality, complex terms like “bonus reversionary” or “non-participating” remain opaque to most buyers.

The third gap: communication depth

Our findings show 63% of consumers received less than one hour of explanation before purchase. For multi-year, multi-charge contracts, that’s barely enough to cover surface features. The product becomes a story, not a financial instrument.

The origins of the gap

The roots of this gap lie in how financial products have evolved faster than financial education. Insurance today is no longer a simple protection contract; it blends long-term savings, investment and risk cover, yet many consumers buy it with remarkably low involvement. They don’t read the policy, don’t ask the questions (what happens if I miss a premium, exit early or need liquidity), and often treat the purchase as done once the first payment is made.

The compounding effect on consumers

Every knowledge gap on the agent’s side compounds exponentially at the consumer’s end. A weak grasp of IRR leads to inflated expectations, because agents often communicate gross returns without considering charges or inflation.

Confusion between real and nominal returns causes overestimation of wealth growth, pushing policyholders to treat long-term traditional plans as high-yield investments. From product selling to financial interpretation

Closing this gap requires change on both sides:

• Reimagining the agent’s role from seller to interpreter, and expecting consumers to participate more actively rather than outsource understanding entirely.

• Agents should function less as transaction points and more as educators who translate complex terms into everyday meaning.

• Consumers should be nudged to ask basic, non-negotiable questions on renewals, exits, liquidity, and what happens if payments stop. When an agent can explain why a 7% nominal return may translate into only ~2% real gain after inflation, the conversation shifts from persuasion to empowerment. But that shift only sticks when buyers also show up with intent to understand; the combination of informed interpretation and engaged questioning can rebuild trust far more effectively than any marketing campaign.

To sum up

The future of India’s insurance lies not in more products, but in more precision. Agents are the industry’s first line of interpretation; without equipping them with technical fluency, every reform downstream digitalisation, disclosures, grievance redressal will remain reactive.