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The Insurance Regulatory and Development Authority (Irda) has, after getting critical comments on it, indefinitely deferred implementation of various provisions in its Standard Proposal Form for Life Insurance. These were to have taken effect from April 1.
The regulator said this was to facilitate a more comprehensive debate on the contentious provisions. Specifically deferred are implementation of obligations under sections 5, 6, 7, 8, 9 and 10 of the Irda (Standard Proposal Form for Life Insurance) Regulations 2013. These mandated detailed suitability analysis for customers.
Irda clarified these regulations did not apply to micro insurance products and those distributed through the Common Service Centre channel.
The regulation was gazetted in February 2013 and was to be implemented from August 2013. Later, Irda said this would be applicable from April 1, 2014.
The companies had represented for amendments to the provision. The Standard Proposal Form guidelines recommended a suitability analysis of each customer to be done before selling a policy to him/her. Companies had argued they had internal procedures to ensure the products sold were specific to a customer's need and without the need to fill long forms.
"Based on the suitability of information gathered from the prospect, the Insurer or Agent or Bancassurance or Broker or the insurer's employees where direct sales are involved, must have reasonable grounds to believe the product being recommended to the prospect is suitable for him /her," Irda had stated in its regulations.
Among the items specified for need-based information were projections for up to 30 years for living expenses, education expenses, travel expenses and working span, apart from areas such as expected inheritance and desired sum assured, among others.
Insurers also said the mandatory nature of the form would have dissuaded customers and increased the time to finalise a sale.
