The Hindu Business Line : Needless burden

Have you ever heard customers being asked to swear an affidavit saying that they have understood the details of the product offered? Such a practice is going to be started by the life insurance industry from next month.

According to a media report, the self-regulatory organisation of the industry, the Life Insurance Council, and statutory regulator IRDA have decided to impose on customers buying life insurance products the burden of executing an affidavit to the effect that they have understood the product they intend to buy and the risks associated with it; the affidavit will contain illustrations that an insurer gives customers to help them understand the product.

The proposal may be well-intentioned — to reduce the ‘rampant mis-selling in the industry.

But to achieve this by asking the customer to swear an affidavit is like ‘killing a mosquito with a sledge hammer’.

It is the customer who is being asked to swear an affidavit and not the agent, who should in fact be responsible for satisfactorily explaining the nitty-gritty of the product to the prospective customer.

In this context, it would be useful to just refresh why it used to be held that the principles of caveat emptor did not apply to financial products.

The present move is an attempt by the industry to rewrite that dictum.

It is hoped this uncalled for and onerous burden on the customer is given up and instead the industry and the regulator ensure that the agents who are appointed by the individual insurers truly, faithfully and satisfactorily explain the products to the insuring public.

That satisfaction is more important for the companies to achieve.

S. Subramanyan Mumbai

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