The Insurance Regulatory and Development Authority (IRDA) is considering making it mandatory for life insurance companies to issue policies in dematerialized form from later this year. In the short term, it will make it mandatory for lifecompanies to link up their systems to insurance repositories and provide policyholders with an option to hold policies in electronic form.
Last year, the insurance regulator had licensed five companies to provide insurance repository services.
These were NSDL Database Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, CAMS Repository Services Limited and Karvy Insurance Repository Limited.
Insurance repositories are the equivalent of depositories in the capital markets.
Just as an investor needs to open a one-time depository account, the repository re
quires policyholders to open an e-insurance account free of charge. Although the service was inaugurated by then finance minister P Chidambaram in Septemberlast year, life insurers have been slow to come on board.
As a result, only about one lakh e-insurance accounts have been opened and the number of policies that have been dematerialized are a few thousand.
One reason for the slow pick-up is that only ten of the 24 life insurance companies have signed up to provide de
mat policies to their customers. Some of the larger players, like Life Insurance Corporation and SBI Life Insurance, are yet to come on board. Private companies that provide e-insurance account include ICICI Prudential, HDFC Life, Birla Sun Life, Star Union Dai-ichi and Aegon Religare.
According to S V Ramanan, CEO of CAMS Insurance Repository , demat policies would benefit both the customer as well as the insurance company . “In both maturity and death claims, there is no requirement for submission of original policy. Given the long-term nature of life insurance, loss of policy document is a frequent problem faced by customer,” he said.
He added that insurance companies would benefit as much of the back office work of sending reminders and maintaining records would be undertaken by the repository. “This will be similar to what is happening in the mutual fund industry where all aspects of customer service are taken care of by the registrar and transfer agents and the funds focus only on selling an investment. There is a huge cost saving and companies will have to open fewer offices for customer service,” he said.
The other advantage of an account with a repository is that the customer will have to undergo the ‘know your customer’ procedure only once and subsequent purchases can be done on the basis of the information already stored with the repository.
Source : The Times of India