Sales, Advisory and Customer Suitability in Bancassurance
The suitability principle
Suitability means the product recommended matches the customer's needs, financial situation, risk appetite and time horizon. In a bank branch the risk is acute: a deposit customer walks in for a fixed deposit and walks out with a long-term savings or unit-linked policy they did not understand. Questions test whether the candidate can separate protection need (term, credit life) from savings need (endowment, ULIP) from pure deposit (bank product).
The advisory process
- Fact-find / needs analysis: income, dependants, existing cover, liabilities, horizon.
- Recommendation: explain why this product fits, and what it does not do.
- Disclosure: premiums, charges, surrender values, lock-in, investment risk (for ULIPs), and that the bank is an agent.
- Documentation and consent: signed proposal, free-look period explained.
- After-sales: servicing, renewals, claims support.
Traps in questions
- Mis-selling by omission: presenting a ULIP as a "fixed deposit with bonus" - the classic trap.
- Churning / replacement: pushing a new policy to earn commission when the existing one is suitable.
- Over-insurance and under-insurance: recommending cover far beyond need, or a savings product to someone who needs pure protection.
- Vulnerable customers: elderly or low-literacy customers need clearer explanation and often a second check.
- Free-look period: customers can cancel within the stated period; questions test whether the candidate knows this right exists.
Worked example
A 35-year-old with two children and a 5 million rupee mortgage has 500,000 rupees to place. The suitable first step is mortgage protection and term cover to match the liability, not a 20-year unit-linked plan that locks the money and leaves the debt uncovered. The recommendation is justified by the liability, not by the commission.
Rule of thumb
If you cannot explain in one sentence why this customer needs this product, it is not suitable.