What is standard proposal form? Who proposed this and why?
In an effort to curb mis-selling in life insurance sector, IRDA came up with a standard proposal form which aims to bring transparency in sales process. The 12 page form comprises four sections - A) details of prospect, B) specialized/additional information, C) suitability analysis and D) recommendations. Sections A and D are standard and mandatory, Section B may be modified as required and Section C is standard and highly recommended.
A) Details
of prospects: It includes complete personal details of a policy holders like such
as family details, age, employment details, marital status, education, PAN,
nominee, existing policy details, purpose etc..
B) Specialized/additional
information- This part of standard proposal form aims to track health details
of policy holders like height, weight, undergoing medical treatment, past
diseases etc.
C) Suitability
analysis- This part is to get an idea of suitability of the policy holders and
also seeks to access future financial needs of the policyholders. Suitable
analysis form may help intermediaries to provide better recommendations so that
a policy holder could maintain same living standard as he is maintaining today.
It includes projections like affordable contribution of policy holders towards
policy, work span, projected income of 30 years, financial needs etc.
D) Recommendations-This part is filled by the intermediaries to indicate the details of product recommended. This section carries necessary questions like details of commitment, assured income, suitability of policy, etc.
Who is going to fill the form?
Policy holders are required to fill the standard proposal form. They should not allow an intermediary or third party to do it. However, in case they are not in a position to do so, they have to ensure that the details filled in are true and understood by them.
What are the things which an intermediaryshould keep in mind?
Every insurance agent, bancassurance, broker or the insurer’s employee who is directly involved in sales of insurance products should have to inform the policyholders about all the relevant details of product like surrender charge, administration fees, market risks and other. They should have to adequately train themselves so as to determine the suitability of products. They should also maintain the records in physical as well as electronic form to make availability to the authority in case of any discrepancies.