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Shyamal Banerjee/Mint
Shyamal Banerjee/Mint

Benefits of digitising insurance

All service requests with regards to the e-insurance account or any of the electronic policies can be submitted online or at any of insurance repository's service points

People use their mobile phones for just about everything now. Though Internet banking has been available for many years, the advent of mobile wallets has made people more comfortable with transacting. From booking cabs, to booking movie tickets and even to buying groceries, it is all done using mobile phone apps.

In the financial services industry, shareholding has been dematerialised, and products such as the National Pension System and mutual funds are available electronically. And many private banks will now charge if you want to visit their branches for transactions.

The Insurance Regulatory and Development Authority of India (Irdai) introduced the insurance repository in 2013—a first of its kind initiative in the world. As of now, no other country has started dematerialisation of insurance. The US does not have a single, country-level regulator to drive this initiative (insurance is regulated at the state level). While countries like China, Singapore, and certain African nations have evinced interest in understanding more about this initiative and how it can be implemented.

An insurance repository is a facility that helps policyholders buy and keep insurance policies in an electronic format, rather than as a paper document. Insurance repositories, like share depositories or mutual fund transfer agencies, hold electronic records of insurance policies issued to individuals, and such policies are called electronic policies or e-policies. These can hold individual life, motor and health policies.

However, the current traction to this initiative has been low because policyholders have not understood its benefits. Here are some of benefits of holding insurance electronically: 

Safety: There is no risk of loss or damage of a policy; the electronic form ensures that they are in safe custody and can be easily accessed when needed.

Convenience and single point of service: All insurance policies, be it life, pension, health or general, can be electronically held under a single e-insurance account. Premium for all the policies can be paid online and service requests or complaints can be registered at the website of the insurance repository.

All service requests with regards to the e-insurance account or any of the electronic policies can be submitted online or at any of insurance repository’s service points. Service requests include switch transaction, and nominee change, which can now be handled online. However, requests that require a wet signature and proofs, such as for name or address change, you still need to visit repository office.

Less paper work: When you want to buy a new electronic policy under an existing e-insurance account, you do not need to go through the know-your customer (KYC) verification process again. Further, if you want to make any changes to your personal details like address or contact details, you just need to change the details in your e-insurance account with the repository by submitting a single request. The repository will then inform all the insurance companies with whom you hold electronic policies, about the changes. Such service request which pertain to the e-insurance account is executed by the repository, and the information is then passed on to the insurer. Whereas service requests with regards to insurance policies, loans, change in nomination details and so on, the repository will coordinate with the insurer for its execution, after which it will be communicated to the policyholder.

Smoother claims: One of the challenges experienced at the time of making claims (maturity or otherwise) is the submission of original documents to the insurer. Due to the lack of availability of documents, there is over 5,000 crore of unpaid money lying with insurers. In case of e-insurance accounts, bank details of the policyholder are available through the e-insurance account, and insurers can make payments using National Electronic Funds Transfer.

Operational benefit: An e-insurance account can be operated by the account holder only during her life time, unless she has been rendered incapable to operating it. In such circumstances, the account can be operated by an authorised representative (AR) appointed by the account holder. A policyholder who opens an e-insurance account has to appoint an AR who will be entitled to access it in the event of demise of the policyholder or in her incapacity to operate the account. Do keep in mind that an AR is different from a nominee. The AR can only access the e-insurance account to know the portfolio of policies and the nominees of the respective policies held under that account. The policyholder can change the AR during the term of the insurance account.

Cost effective: Another advantage is that all basic services provided by the insurance repository are free of charge. Policyholders need not pay extra to buy an electronic policy or to dematerialise an existing policy. Similarly, they need not pay to avail of any services from the insurance repository, including online premium payments and services available on the repository portal.

The repository will be paid directly by the insurance companies whose policies are held in electronic form so that no charges are levied on policyholders. Insurance companies will be able to pay repository for the services rendered out of the savings that will accrue to them by the shifting to electronic policies.

To promote the digitisation initiative in insurance, aligned to the Digital India initiative of the government, Irdai has released draft regulations which mandates that insurance policies above a certain annual premium (10,000 in case of life and health, and 5,000 for motor) has to be mandatorily issued in electronic form. This can increase the penetration of insurance repositories, and in turn benefit the policyholder.

S.V. Ramanan, chief executive officer, CAMS Insurance Repository Services Ltd.

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