Should you Hold Insurance Policies in electronic form ?

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In an era where the business world is increasingly moving towards paperless transactions, the insurance sector does not seem to have kept pace. At least in certain aspects, that is. For instance, even in this digital age, life insurance policyholders are required to preserve the policy document issued over a period of 15-20 years, that is, the entire policy tenure. Of course, you can always ask for a duplicate copy by calling up your agent or insurer, but wouldn't it be easier if you could simply maintain it in the electronic form? After all, investors have had the comfort of holding equity shares in dematerialised form for a long time. In case of mutual funds too, you are not required to produce a physical proof of your mutual fund investments for trading and redemption purposes.

Enter DeMat Policies

Realising the need to put in place similar infrastructure for insurance policies too, the Insurance Regulatory and Development Authority (Irda) issued guidelines last year for converting them into electronic form. It is expected to become operational by April 2012. To begin with, only life insurance policies — including pension plans — can be dematerialised, but the regulator plans to extend the same to health and motor policies, going forward. So far, the insurance regulator has given an in-principle approval to NSDL, CDSL, Karvy, CAMS and STCI to function as insurance repositories. These repositories will maintain basic information about policyholders and their dependents or nominees, along with the records of any claims made or loans taken against the policies.

Signing Up For E-Insurance

If you intend to convert your life policies into the demat form, you will have to open an e-insurance account, which is a one-time process. They can either approach any of the insurance repositories to open an account or submit an account opening form along with the proposal for insurance cover to the insurance provider. In case of new policies, the insurer will forward it to the approved repositories set up specifically to facilitate the process. You will need to submit your identity and address proofs for the purpose. Once the policy is issued, it will arrange to share the policy details with the insurance repository who in turn will update it to the customer's insurance account.

Those with a policy can open the account by themselves by submitting the policy conversion request along with the policy document to the repository. While the insurance company will not levy any charges, you may have to pay a fee to the repositories. In case of new as well as old policies, the repository will intimate the policyholder after the account is opened and updations are made. You can view all these details by logging in to your e-insurance account using the log-in ID and password provided by the repository.

Convenience Amplified

Many feel that e-insurance can do to the insurance space what dematerialisation of equity shares did to the capital markets. The biggest advantage is the convenience it offers. Policy documents can be maintained in the electronic form, eliminating the need to make efforts to preserve them.

Moreover, if you have an account, you needn't go through the KYC compliance procedure every time you buy a policy. If you own multiple policies, all of them will be reflected in a single account and thus keeping track will become easier. Now, most customers buy policies from various companies. If, at a later stage, there is a need to modify personal details like address, they will have to approach all these companies individually. However, if they have an e-insurance account, they would need to intimate the repository only once. It could be a source of comfort for your nominees to. They will not have to run around looking for the documents if there is a claim. Since the repository will consolidate all policies under a single account, the family will immediately come to know of the policies purchased by an individual, in case of an emergency. Also, the repositories will facilitate processing of service requests, which hitherto could only be serviced through the agents or the branches of the insurances companies. Assigning a policy if you are taking a loan against it will also be simpler through this route.

A Single Solution To All Problems?

Not really. At least, not in the initial phase. You will still have to contact your insurance company or agent for certain services. As thing stand now, policyholders will be able to view only the basic data through the account initially. For the information on say fund value of your Ulip, you will still have to approach the insurance company. In the future, though, the customer may get to view such information too.

While it promises to eliminate several layers of communications that delay procedures, don't forget that your agent's services may come in handy at the time of a claim.

And finally, you need to remember that it is an option that policyholders can exercise and is not mandatory. You can always insist on a physical policy if you are not comfortable with e-insurance. Also, should the need arise in future, you can get the electronic versions reconverted into physical documents.

 

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