Life insurers to have similar application forms

Irda directive aimed at curbing mis-selling of policies

The Insurance Regulatory and Development Authority (Irda) has asked life insurers to have a standard format in application forms that clients have to fill in before purchasing a product.

The regulator issued an exposure draft on April 16, proposing regulations relating to prescription of a standard proposal form for individual policies in life insurance.

Irda has suggested a proforma of the proposal form in the draft and has asked life insurers to include a section on need analysis and soundness of the agent’s recommendation to help customers with need-based buying.

Irda floated the idea of a standard application form to address mis-selling, so that it ensures all customer needs are known to the insurance company before issuing a policy.

 

This draft is in continuation of the exposure draft that was issued to insurers on January 31. In the initial draft, the regulator had suggested insurers have their own forms, which could include the need analysis section. But the current draft suggests all life insurers have to follow a standard proposal form divided into four main categories.

According to Irda’s prescribed format, details of the prospect, needs of the prospect and agent’s recommendation are the three mandatory categories in the form. Specialised information category is mandatory but can be modified by the insurer as required.

The draft document released by Irda states that it is not being prescriptive about any particular matrix or model, but regulations envisage requiring insurers to have in place a process and system to assess the needs analysis carried out for each and every proposal received and the soundness of a recommendation about a particular product being made.

Life insurers have been asked to send their feedback on these draft regulations by May 15.

S B Mathur, secretary general, Life Insurance Council, says, “The move is in the right direction. But implementing this in villages and other backward regions will be a task, as the form demands intricacies of lifestyle which may be difficult for those people to absorb.”

Once it gets approved, all agents and brokers will have to be trained on the new standard proposal form and needs analysis category. Guidelines, once notified, will be effective from September 1, 2012.