Advisors feel collecting details from clients could be a cumbersome task.
The insurance regulator has released draft regulations which aim to provide for a standard proposal form for individual policies in life insurance. Under these proposed regulations, an agent has to get detailed information from a client and declare that the product recommended is suitable for the client.
This proposal is aimed at bringing in transparency in the selling process and curb mis-selling. Though IFAs agree that such a move is warranted, they feel that this form will complicate the selling process.
“IRDA has taken a move in the right direction but the challenge remains in getting the details from the client. Most of the clients are only interested in signing the form rather than going through the intricate details mentioned in the form. An IFA’s work will become more complicated with the new format,” says Yogin Sabnis, Proprietor, VSK Financial Consultancy Services.
IFAs have to suggest products based on ‘suitability’ of the prospect for a particular product, and the standard form has to capture all these details. It has four main sections:
A) Details of the prospect
B) Specialized/additional information
C) Needs of the prospect
D) Recommendations, apart from the standard declarations.
Sections (A), (C) and (D) are standard and compulsory (to be filled by consumers) and section (B) may be modified as required.
Further, the agent also has to declare that the client “would benefit from purchasing such a product”.
“We find the form complex, and IFAs have to carry out due diligence more carefully with the new format,” says Mukund Seshadri, a Mumbai-based IFA.
The regulator has sought feedback on the draft regulations by 15th May.