India’s financial sector is accessible, but a “confidence crisis” among customers is limiting loans, insurance and investments, said a survey on Tuesday.
Consumers can access products but struggle to engage with them meaningfully, according to the Ease of Engagement Score (EAS) 2026 study by Terragni Consulting. While digitisation has improved access, many struggle to understand processes and evaluate decisions.
Health insurance: Despite an 89 per cent claim settlement ratio, insurance penetration has dipped from 4.2 per cent to 3.7 per cent, leaving over 430 million Indians uninsured, said the survey, citing data from the industry regulator.
Claims experience: Nearly 69 per cent of policyholders reported claim rejections or partial approvals, according to a LocalCircles survey cited by Terragni.
Mutual funds: Even with over Rs 75 trillion in assets under management, mutual fund investors often require multiple interactions to complete basic redemption requests, according to data referenced from the Association of Mutual Funds in India.
Terragni’s report concludes that consumers are often “transacting out of necessity rather than confidence”, limiting deeper financial participation.
Lack of confidence means people tend to:
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Delay buying insurance despite risk exposure -
Limit investments despite rising incomes -
Avoid credit even for productive purposes
The study frames this as a behavioural constraint, where cognitive overload and lack of clarity discourage decision-making.
Complaints data signals deeper issues
The trust deficit is also reflected in rising grievances.
Loan-related complaints rose 43 per cent year-on-year to 85,281 cases
Overall banking complaints increased 68 per cent to over 934,000 cases, according to data from the Reserve Bank of India Banking Ombudsman system cited in the report
Importantly, the study notes that dissatisfaction is often linked to unclear processes and terms, not just delays.
‘Dark patterns’ worsen mistrust
The report highlights the widespread use of “dark patterns” — design and sales practices that increase friction:
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Hidden fees and complex surrender penalties -
Jargon-heavy documentation -
Bundling practices such as “No policy, no loan” -
Multi-step processes that exhaust customers
Internal pressures also play a role. The study notes that 57 per cent of relationship managers admitted being pushed to sell unsuitable products, while 51 per cent feared job loss if targets were not met.
Economic implications
The report argues that low confidence is not just a consumer issue but an economic one.
It identifies four key consequences:
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Slower insurance adoption -
Weaker investment participation -
Lower credit utilisation -
Reduced entrepreneurial risk-taking
This could constrain financial inclusion outcomes despite strong digital infrastructure.
Clarity, not speed, may define the next phase
The EAS framework evaluated engagement across “three dimensions” — access, ability and aspiration — and found that India has largely solved access, but not understanding.
Terragni Consulting estimates that reducing “cognitive friction” in financial journeys could unlock 25–35 per cent higher customer lifetime value for firms while improving engagement.
The report suggests that the next phase of growth will depend on transparency, simpler communication and real-time visibility into processes, shifting the focus from transaction efficiency to informed decision-making.
