Information required at the point of sale :

Once the customer decides to purchase an insurance policy, the documentation of the customer’s needs and requirement takes place.

Usually, under a life insurance policy, the knowledge of the consumer is verified by means of a “Benefits Illustration” document which is required to be signed before the consumer proceeds with purchasing an insurance policy. This is an excel sheet which lists down year on year the premiums payable under a life insurance policy, with the corresponding benefits for each year. Thus, customer understanding is first confirmed in writing.

Then, the Consumer is required to fill in an application form for insurance (also called Proposal form in insurance), where he fills the information required about the subject matter to be insured (which is the life assured in the case of life insurance).

Since insurance is based on the principles of “ubberimae fidae” (utmost good faith), the consumer is expected to disclose all the questions asked in the proposal form sincerely and truthfully. Any misstatement or concealment of any material fact in the proposal form could lead to a repudiation of policy benefits later. Therefore, knowledge on the part of the Proposer (applicant) that he needs to carefully disclose all the material facts within his knowledge about the subject matter of insurance becomes very critical.

In Life insurance, there are questions concerning status of health of the life assured which needs to carefully replied. Most litigation in life insurance and health insurance today happen due to non disclosure of health status correctly in the proposal form.

The distributor who sells the policy, usually the agent, plays a critical role here in bringing this point to the knowledge of the consumer and assist him in filling the form. In case the agent does not do his duty properly here, it could cost the consumer in the form of cancellation of policy benefits.