The Insurance Regulatory Development Authority of India (IRDAI) has mandated dematerialisation of new insurance policies by this year-end. It has urged all insurance companies to dematerialise their existing or old policies by December-end, industry experts have said.
“We expect IRDAI to soon release a circular on this move. All expected stakeholders have agreed to this. This would make the insurance process very convenient for the customers. So far, it has not happened due to operational challenges and cost concerns,” says a senior industry official on condition of anonymity.
In a move to make the dematerialisation process of insurance policies faster, e-KYC will also become mandatory for all insurance policies, starting November 1, 2022. Insurance policies could be dematerialised with National Securities Depository Limited (NSDL), Central Depository Services Limited (CDSL) or Karvy, according to industry experts with knowledge of the matter.
Dematerialisation or ‘demat’ will allow a policyholder to create a portfolio of insurance policies and store them in an electronic form with an insurance repository. Put simply, one will not have to engage in any paperwork while renewing his/her policy. This process would result in reduced transaction costs and quick modifications in policies.
According to experts, it will work in much the same way in which people keep shares in the demat format. Now, they will be able to store their insurance policies in demat form starting December.
Expert View
According to experts, the dematerialisation of policies is a progressive move that will bring the benefits of automation and digitisation to the fore, and help serve customers better.
Says Vijay Gupta, senior vice-president, NSDL Database Management Limited (NDML), a wholly-owned subsidiary of NSDL: “Think of e-insurance account (EIA) as your online, digital companion, which is available anytime, anywhere, and provides you with instant access to all your insurance assets and services on the same. The power of this tool will be realised when you see all your health, travel, motor, life and even group policies coming together. You have access to it; your beneficiaries will get access/information about insurance assets.”
“You need a duplicate copy, you can take it from EIA. You need to update address or some other information, you can do it on EIA. The EIA can also be used as a store of KYC details so that repeat KYC can be avoided. You don’t need to log-in to different websites to see your policies. Importantly, all of this comes without any cost to the policyholder. This is a regulated infrastructure with strong adherence to compliances, institutional governance and strict implementation of infosec and cyber security rules,” he adds.
According to experts, the move has been initiated keeping the interest of the policyholder at the core.
It is aimed at delivering better access, services, and support to the policyholder, and expedite the claim process.
“There has been significant uptick in customer interest and adoption for digital channels and services. This move acknowledges the customer need and allows for market-wide institutional arrangements to serve in an efficient and regulated manner. Customers have seen and hugely benefited from demat of financial assets; similar benefits will be delivered now for insurance assets, too. It may be mentioned here that insurance assets (at least on life side) are long-term assets, and needs to be maintained with good care and accessibility,” Gupta says.
According to Vighnesh Shahane, managing director and CEO, Aegas Federal Life Insurance, dematerialisation will be a win-win situation for the insurers as well as the consumers.
“The IRDAI has invited the views of the industry on the dematerialisation of insurance policies, but has not yet mandated this proposal. Getting customers to open e-insurance accounts will benefit all the stakeholders in the system, including the regulator. The sophisticated portal proposed by the IRDAI would ensure greater convenience for customers, as all their insurance policies would be held in a single repository. Customers would be able to buy insurance policies, pay renewals, raise service requests, and get claims settled with greater ease. For insurers, it would allow improved ease of business, while for the regulator, it would give a real-time dashboard and insights,” he says.
He, however, adds that “there are certain operational challenges and cost concerns that needs to be worked out before this proposal is implemented.”
Anant Ladha, founder, Invest Aaj For Kal, a financial planning firm, said this is a welcome move by the regulator.
“Initially, there will be hurdles, as there are already 500 million-plus policies in place. But once it is done, it will ensure easy tracking. Many times, we see that people don’t take insurance because they themselves were unaware, or they want to make changes, but are not sure of it themselves. Dematerialisation will ensure that such cases won’t happen,” he says.
