Page 10 - Life Insurance Today December 2017

The Regulations clearly indicate that the requirements of
disclosure of "material information" regarding a proposal
or policy apply both to the insurer and the insured.
Further, every insurer is required to have in place proper
procedures and effective mechanism to address
complaints and grievances of policyholders efficiently and
with speed. Therefore, the regulations ensure that the
prospective policyholder is given a thorough
understanding of the specific requirements and details
required for taking an insurance policy.

The insurer, agent or intermediary should enable the
prospect to take the best cover that would be in his or her
interest. These regulations mandate compliance of the
agents, corporate agents, brokers and web-aggregators
with the code of conduct prescribed therein to ensure that
the persons soliciting insurance business should be eligible
certain type of products like highest NAV guarantee,
persons and they disseminate the requisite information in
splitting of policies, accepting advance premium for long
respect of insurance products offered for sale, understand
periods in case of linked products, prohibit mis-leading
the policy being sold and should be capable of making
names so that there is clarity on savings and protection
suitable advice based on the customer needs so that the
products in case of non-linked products.
policy offered / sold meets the requirements of the
prospect. Responsibilities are cast upon the agents and
The regulations also bring in transparency in terms of
other intermediaries in terms of code of conduct, which
benefit payouts and enable the customers to choose the
are mainly aimed at curbing the mis-selling and to promote
best practices during solicitation of the business. right policy. In case of linked products the regulations for
linked products make it mandatory for separate training
to all the insurance agents/intermediaries before they are
Financial Literacy:
authorized to sell linked insurance products,
Financial literacy in the distribution channel itself is the recommending a suitable product and collecting sufficient
main cause of mis-selling. It leads to underinsurance and information about the potential policyholder as a proof
improper coverage for the insured. The problem lies in a thereof, inform the upfront charges and indicate how
lack of training on part of the employer for need-based premium paid is appropriated towards various charges
policy selling. The definitive way of reducing mis-selling is from the unit fund and the balance of the fund at the end
to make the members of public aware of the concept of of the first year and subsequent years.
insurance, kinds of insurance policies, risks covered,
benefits offered, exclusions, and conditions etc. This is An agent/ intermediary should obtain a statement of
sought to be achieved through various efforts of financial consent signed by the policyholder and countersigned by
education to improve financial literacy. the person (agent intermediary etc) himself/herself, along
with the proposal form, that he has understood the inbuilt
These regulations ensure that the commission rates are features of the policy and the applicable charges and that
consistent across the industry and have been smoothened he is fully aware of investment risks under the policy to
with the payments depending on the premium payment be issued.
term. The benefit illustration requirements have been
made applicable not only to linked products but also to all Insurers have also been taking the issue of mis-selling
the non-linked products also. The Regulations prohibit seriously by doing a root cause analysis of mis-selling

“Accept responsibility for your life. Know that it is you who will get you where you want to go, no one else.”

10 December 2017 Life Insurance Today

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