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All life insurance policy proposals will soon carry an agent's recommendation on the ‘suitability' of the product for the buyer.
The recommendation will have details such as why a particular policy is suggested to the customer and the required level of protection required.
It will be the obligation of insurers, agents or brokers to determine the suitability of an insurance plan for the buyer.
The recommendation and certification by the agent will be a part of the standard proposal form for all life insurance policies to be introduced by the Insurance Regulatory and Development Authority.
“A standard proposal form not only brings in uniformity in information sought, but also ensures that it takes into consideration all relevant questions that are required to understand the need for a particular insurance product,” Mr J. Hari Narayan, Chairman, Insurance Regulatory Development, said in an exposure draft.
What makes the standard proposal form different from the existing one is ‘suitability' information in a written form as provided by an agent or broker.
From a policyholder's point of view, this helps in preventing mis-selling and makes insurers/agents more accountable.
Mis-selling of policies
As per IRDA data, the complaints of mis-selling of policies have gone up in the fourth quarter of last financial year.
The form will also contain the basic details of the customer who wishes to buy a policy, need-based analysis and specialised information, if any.
The regulator intends to make the standard proposal form compulsory for all individual policies issued by life insurance companies, irrespective of the segment and type of product, from September 1, 2012.
It has also asked insurers to maintain reasonable procedures to inform insurance agents and brokers of the requirements of the standard proposal form and train them to determine the suitability of products for customers.
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