Life insurance companies are uncomfortable with the draft seven-page standard application form proposed by the Insurance Regulatory and Development Authority (IRDA) to facilitate need-based selling.
The application form has detailed questions which customers have to fill. Further, it requires insurers, agents and brokers to sign on the recommendations they make to the customers, thereby putting the onus for selling the insurance product on them.
The insurance advisory committee, at its meeting held recently, deliberated on the exposure draft. The members of the advisory committee include representatives from the regulator, life and general insurance industry, brokers, actuaries’ institute, ministries of shipping, law and finance, and industry bodies.
The proposed form has four sections — section A asks for details of the prospective customer; section B, specialised and additional information; section C, needs of the prospect; and section D, the recommendation of the agent.
The IRDA’s initiative is aimed at eradicating miss-selling of products and ensuring that consumers reap the benefit of buying appropriate products. Insurers, however, feel that adopting the form is operationally inconvenient as some of the information required to be filled in is too complex for the consumers.
Insurers also feel that the cost of retraining their agents and brokers and printing lengthy forms will be high.
“The proposed form has too many detailed questions. Many people don’t want to reveal so much personal information regarding their income and liabilities to their agents,” said G. V. Nageswara Rao, MD and CEO, IDBI Federal Life Insurance.
“Our life insurance proposal form is already a four-page document, which has most of the relevant information. More information than this is not in the interest of the customer or the insurer,” said G. N. Agarwal, interim CEO, Future Generali Life insurance.