The Insurance Regulator in India IRDA feels that life insurance policies should be sold based on the customer’s requirement and suitability. In order to achieve this, the regulator has suggested use of a Suitability Index or Prospect Product Matrix which should be used by the insurers to check suitability before making a life insurance sale.
Based on the inputs received from the customer by the insurer or its distribution partners, a suitable product can be recommended to the customer. This would apply to all types of life policies – traditional, ULIP, Pesnion Plans and Health Plans.
The Suitability will be decided based on the customer’s risk profile, financial profile and investment objectives. Specifically, the inputs required from the consumer would include:
- Age
- Annual Income
- Financial resources used for funding the purchase of the life insurance product
- Intended use of the life insurance product
- Financial objectives with time horizon
- Existing assets including investment and life insurance holdings
- Liquidity needs
- Liquid net worth
- Tax status
- Risk tolerance
- Such other information used or considered to be reasonable by the insurer in making recommendations to the consumer
These guidelines would be effective 1st April 2012
So don't be surprised if your insurance agent asks you a lot of personal financial questions before selling a policy to you!
