The insurance regulator has deferred the implementation of a standard proposal form for life insurance. These forms mandated insurers to conduct a detailed need-based analysis of prospects and sell policies according to their suitability.
The Insurance Regulatory and Development Authority (Irda), in a circular, said that after examining various representations from insurance companies, the implementation of the proposal has been deferred to facilitate comprehensive consultation. The regulations are, however, not applicable to micro-insurance products or those distributed through the Common Service Centre Channel.
Irda had issued a gazette for a standard proposal form in February last year and it was to be implemented in August itself. The deadline was later extended to April 2014.
Analysts say the comprehensive standard proposal form, which applies to individual policies, would have curbed misselling as the insurer would have been responsible for selling a wrong product.
The Irda’s gazette notification on a standard proposal form consisted of 12 pages, divided into four sections — (A) details of life assured; (B) specialised/additional information; (C) suitability analysis; and (D) recommendation or the product proposed.
While sections A and D were mandatory, section B could be customised. Section C was optional. The objective was to understand the need for a product being recommended to protect the prospect’s interests. The standard proposal form would have been applicable to individual policies issued by life insurance companies, irrespective of the segment and type of the product.
The first section contained mandatory information about the proposer like name, address, contact details and basic health details. In the second part, the proposer would have to submit specialised health information like physical deformity, any accident requiring treatment, if absent from work for more than a week in last two years due to illness, etc.
The third section would involve suitability analysis like affordable contribution, span of work, income-expenditure, financial details and the identified insurance needs. The fourth and final section would be product proposed details like protection needs, life stage, details of commitment for the current and future needs, etc.
Analysts say the standard proposal form faced certain implementation issues. Prakash Praharaj, chief financial planner, Max Secure, says prospects were reluctant to give adequate time to complete a proposal form. “The result of need analysis depends on the accuracy and quality of the collected data,” he says.
In the standard proposal form, it was mandated that an agent will have to ensure that all risk elements