Next thing you know, the insurance agent has stopped nagging you to buy this new product or that and is instead seeking personal details such as your age, income and financial goals.
Hard to picture?
Well, the insurance regulator has at least made an attempt to ensure mis-selling is curbed if not eradicated altogether.
As per the draft guidelines put out on its website by the Insurance Regulatory and Development Authority (IRDA), life insurance companies will now provide a standard proposal-cum-need analysis form to the customer at the time of sale.
The need analysis form would require the agent to collect details such as the customer’s profile (age, annual income, financial resources used for purchase of the particular product, etc), risk appetite and financial goals.
Based on this information, the agent or broker will suggest policies best suited to that particular customer.
The agent will also inform customers of the features and benefits of the products and of the various charges such as surrender and administration charges.
Call it the ‘prospect product matrix’, then. “The objective of these draft guidelines is to set standards and procedures for development and implementation of a board-approved prospect product matrix by insurers, which shall be followed by the direct sales personnel of insurers and their agents and brokers,” said IRDA.
The guidelines will be effective April 1 this year. The changes will apply to life insurance policies to start with and later extended to non-life policies as well.
The life insurers have been asked to send in their comments before the end of this month.
Insurers have welcomed the move.
“This is a right step in the right direction as it will help to improve the quality of sales,” said GV Nageswara Rao, MD & CEO, IDBI Federal Life Insurance. “It will be a more structured process wherein the distributors can provide the right policy by analysing the needs of the customers,” he said but pointed out that “the greatest challenge in this can be the unwillingness of people to give the required information.”
GN Agarwal, chief actuary, Future Generali Life Insurance appeared to concur. “The draft guidelines on need-based selling are in place. But the financially literate customers will benefit more out of it. The final decision on choosing the cover and policy will have to be taken by the customers,” he said.
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