All insurance policies will now be available in digital format. The Insurance Regulatory and Development Authority of India (Irdai) has issued guidelines on insurance repositories on 29 May, in which it has allowed life and non-life policies to be available in a digital form. An insurance repository can store policies electronically under a single e-insurance account. Currently, there are five registered repositories for this purpose: NSDL Database Management Ltd, Central Insurance Repository Ltd, SHCIL Projects Ltd, Karvy Insurance Repository Ltd and CAMS Repository Services Ltd.
The biggest advantage of digitizing an insurance policy is that you don’t need to worry about losing the documents. In fact, all policies can be held under one virtual roof, the e-insurance account. “Policyholders are the biggest beneficiaries as they won’t have to preserve policy documents. Family members, too, won’t have to run from pillar to post to seek policy details in case of an emergency,” said Vighnesh Shahane, chief executive officer and whole-time director, IDBI Federal Life Insurance Co. Ltd. “Policyholders will also have a single reference point for all their life, general and health insurance purchases. This is on the lines of the consolidated mutual fund statement that displays investment details across mutual funds,” he added.
So how does one open an e-insurance account? What are its benefits?
Starting with e-insurance
An e-insurance account can be opened either directly with any of the insurance repositories or through an insurer. You don’t have to necessarily choose the repository that your insurer offers, or open several e-insurance accounts for different policies. As part of the back-end operations, there is a central server controlled by Irdai—called insurance transaction exchange (iTrex)—which captures data and gives to whichever repository you choose to open an account with.
Every insurer needs to upload their policyholder’s details—name, date of birth, address, Aadhaar number, and policy number, among others—on iTrex in the form of a shell account. As per the details, iTrex will hold only one shell account against your name and tag policies from different insurers under it.
When you go to an insurance repository or an insurer to open your e-insurance account, you need to fill up a form with personal details and those of your policy. The insurer or the insurance repository will upload this information on iTrex and if you already have an e-insurance account, it will inform you so that there is no duplication. In case you don’t have an e-insurance account, one will be created and that information will get uploaded on iTrex for future reference. “Once you have an e-insurance account, iTrex will automatically map all your policies from the shell account to your e-insurance account and you can then choose to digitize all your policies,” said S.V. Ramanan, chief executive officer, CAMS.
For the policyholder, this is free of cost. But insurers need to pay the insurance repository to digitize policies. “Currently, insurers pay Rs.60 for new policy conversion and Rs.40 for existing policy conversion. Service requests and online payments are charged Rs.20-30. The annual maintenance, which is a significant cost as policies have to be maintained for over 10-15 years, would cost Rs.50-75 per policy,” added Ramanan.
The new guidelines also make it mandatory for you, the policyholder, to authorize a person over 21 years of age to access your insurance account to get your policy details in the event of your death or your inability to operate the e-insurance account.
Irdai plans to build an SMS alert system so that a text message can be sent to the registered phone number whenever the authorized representative accesses the account. Such a person’s role is limited to accessing your account, while the benefit of the policy goes to the nominee.
Benefits to customers
Other than the obvious benefit of holding your account in a demat form, thereby obviating the risk of loss or damage to documents (as many people have experienced with mutual funds and stocks), there are also other services that you can avail. For instance, in case you change houses and need to update the new address in your policies, you only need to make the change in your e-insurance account. The repository will update it on the iTrex and insurers can pick the new address. “Services such as change in address are basic. These we can offer our e-insurance account holders only for insurers we have a tie-up with. For insurers that are not tied with us, the customer will have to approach them individually and get it uploaded,” said Ramanan. “This is bound to create some problems for customers as they will not be able to reap the full benefits (of having such an account) that the previous rule (of all insurers tying up with all repositories) allowed,” he added.
Even if you have to inform the insurer, it will upload the data on iTrex, from where the insurance repository will pick it up.
According to the guidelines, insurance repositories will offer three kinds of services to customers: basic, portfolio and premiere. Under the portfolio service, the insurance repository will simply pull out policies mapped to customers on iTrex and make these available along with basic information as uploaded. Both the basic service and portfolio service will be free of cost for customers. The premiere service will be chargeable to the policyholder. The repositories are still mulling what these services will be.
Even as the digitization started with life insurance policies, it is now open to all policies. “We expect motor and health to start as they are 80% of the non-life market. Other non-life products are more customized for individual needs, so creating data structures would be complex,” said Ramanan.
But it may serve limited purpose in the current circumstances. “Unlike a life insurance policy which are long term and need to be stored, non-life policies are short term, usually a year. So there is no immediate need, plus it won’t serve the purpose if customers are still expected to carry the hard copy like in the case of motor insurance,” K.G. Krishnamoorthy Rao, managing director and chief executive officer, Future Generali India Insurance Co. Ltd
Digitization helps not just the policyholders but also the insurers as they are able to cut down costs. “There would be a saving of Rs.25-30 per policy. This has a strong bearing, especially in case of small-value policies. The current regulations have made insurers very conscious of costs and, therefore, it’s important to look at avenues of cost management. The new regulations are a step closer to simplifying the on-boarding process for customers to open an e-insurance account,” said R.M. Vishakha, managing director and chief executive officer, IndiaFirst Life Insurance Co. Ltd.
While the initial phase of digitization has been slow for the industry, insurers expect as more people begin to realize the benefits, digitization will increase.
“This is a new concept. People are still used to paper documents so there is a bit of education required about the long-term and cost-saving benefits of going digital. We were able to digitize over 10,000 policies during the pilot test. So, if the points are explained well, there is acceptance,” said Shiva Kumar N., deputy director-operations, PNB MetLife India Insurance Co. Ltd.
For now, the insurance regulator has not made digitization mandatory, but eventually holding your insurance policy in demat format will be the norm. So start now.