Why your insurance policy gets canceled without notice
30 Nov 2025

Insurance policies are often seen as a safety net, but recent events have shown that they can also leave customers in the lurch.

A case in point is the sudden termination of a motor insurance policy after 25 years of faithful renewal.

According to The Economic Times, the policyholder was informed via email that their coverage would not be renewed due to "considering the experience of the policy/segment." This left them puzzled and seeking answers from industry insiders.

Industry insiders offer insights into policy non-renewal
Expert opinions

An actuary and an insurance broker weighed in on the matter, with the latter saying that companies like Tata AIG and HDFC Ergo are known for their conservative approach.

He also said that these firms are often guilty of not renewing policies without much explanation.

The broker suggested that the decision was likely not influenced by a ₹7,000 repair charge incurred by the insurance company.

Insurance companies' reluctance to customize products
Market practices

Despite decades of offering general insurance policies, companies have been slow to create customized products.

This is due to two main reasons: how data is used and how these products are sold.

An insurance broker explained that even though a lot of individual data on accidents and their severity is available, it isn't used to create graded risk profiles while formulating product constructs.

Sales strategies and regulatory challenges in insurance
Sales tactics

The broker also said that salespeople focus on negotiating with buyers, trimming benefits indiscriminately, and offering discounts to close the deal.

This practice is encouraged by the Insurance Regulatory and Development Authority of India (IRDAI), which prioritizes growth in per capita insurance products over relevance, customization, and differential pricing.

The IRDAI allows companies to enter or exit markets at will based on their willingness to pay as an acceptance criterion for a given year/time period.

Insurers' strategies to limit potential losses
Risk management

Motor insurers, without a reinsurance safety net, may deny coverage broadly to limit potential losses.

This could be for all vehicles in a regional transport office (RTO) or an entire type of vehicle.

The broker suggested that the policy might have been canceled due to a huge payout insurers will have to make for the recent flood that destroyed thousands of cars in the city last month.