As a step to curb mis-selling of insurance policies, IRDA proposes a ‘Prospect Product Mix’ tool for the industry.
Draft guidelines issued by IRDA say that life insurance companies must focus on need-based selling. This move is an effort to make the industry more customer-friendly and once implemented it will prevent any channel of distribution from adopting unfair sales practises, according to an industry expert.
“Needs Analysis by intermediaries and insurance companies is necessary before effecting the sale of a life insurance policy. It ensures that the proposed product is suitable for the prospect to meet his/her needs,” said IRDA.
The regulator expects that the product mix to gradually be refined and result in greater customer satisfaction. The IRDA guidelines state, “To initiate need-based selling, insurers must adopt a ‘Prospect Product Mix’ which serves as a self-governing tool to assess the quality of sale,”
As per the draft guidelines, life insurance companies will provide a standard ‘proposal-cum-need analysis form’ to the customer at the time of sale. The need analysis form will include questions related to customer’s age, annual income, financial resources used for purchase of the particular product, risk appetite and financial goals. The guidelines will be applicable to all life insurance policies (traditional, ULIPs, pension and health) sold as individual policies from April 2012.
Life insurers welcome the move and are ready to take necessary step to curtail mis-selling. “It is a step in a right direction as it will help the customer take a final call on the suitability of the product” said M.N. Rao, MD & CEO, SBI Life.
According to the draft guidelines, an insurer or a distributor must make reasonable efforts to obtain a consumer’s suitability information prior to making a recommendation about any product.
It further stated that agents would require to be adequately trained on the ‘Prospect Product Matrix’ adopted by the insurer. Insurer, in turn, will have to ensure that their agents, brokers and direct sales personnel are given thorough training with regard to the company’s products specifically before they approach any customer.