Life Assurance: Regulation, Suitability and Disclosure
What to master
Life assurance regulation combines prudential rules (authorisation, capital, governance) with conduct rules such as the Consumer Protection Code, suitability, disclosure, complaints and claims handling. Learn the product map: term, whole-of-life, unit-linked savings, annuities and income protection. A life policy pays a defined benefit, not an indemnity, so the sum assured is agreed at outset. Insurable interest must exist when the policy is taken out. Replacement business is heavily examined: switching an existing policy can lose guarantees, incur surrender penalties or restart a waiting period, so the adviser must document why the switch is suitable. Disclosure is central: the proposal form is the basis of the contract, and material non-disclosure can allow the insurer to avoid the policy. Distinguish cooling-off or withdrawal rights from ordinary cancellation after the policy has started.
Traps
Assuming every life policy builds a cash value; most term policies do not. Confusing suitability with a simple product sale. Forgetting that mortgage protection should track the loan term and amount. Treating a unit-linked fund as a deposit. Ignoring beneficiary nomination and the tax treatment of proceeds. Missing that an insurer may adjust a claim rather than void the whole policy.
Worked rule
For mortgage protection, match the policy term to the loan term and use decreasing cover for a repayment mortgage. If a €250,000 loan runs for 25 years, a 25-year decreasing policy is the default; level cover is appropriate only where the need stays constant. Record need, affordability and alternatives.