The Insurance Regulatory and Development Authority of India (IRDAI) has proposed to mandate the dematerialization of all new insurance policies by December this year in a bid to digitize insurance policies. Dematerialization consists of transforming physical documents into an editable format online.
With dematerialization or ‘Demat’, an insured can build up a portfolio of insurance contracts available to him and store them in electronic form with an insurance repository. With this rule, policyholders can only have one “electronic insurance account” (eIA) with an insurance repository of their choice, according to a report from CNBC-TV18.
IRDAI is said to have launched the dematerialization initiative a few years ago, but it has not taken off due to operational difficulties. Today, the insurance regulator is pushing the idea of ensuring a robust electronic mode of policy solicitation, management and storage. From November 1, eKYC will also become mandatory for all insurance policies, which will further contribute to the dematerialization of insurance policies.
IRDAI has also proposed the establishment of a new platform for the sale, management and claims of insurance policies, which will be operational from next December.
In recent years, insurance repositories have been set up with the aim of opening an eIA, which can be a repository of all insurance policies of a client.
Currently, there are four insurance repositories – NSDL National Insurance Repository, CDSL Insurance Repository Ltd, Karvy Insurance Repository Ltd and CAMS Insurance Repository Services Ltd.
The insurance repository manages the electronic insurance account (eIA) of the insured person and all insurance policies (life/non-life/group) can be stored and accessed through this facility. In recent years, insurance repositories have contributed to issuance, storage and electronic services for more than 10 million policyholders.
Advantages of demat insurance policies
The process of dematerialization of insurance policies is similar to the dematerialization of stocks and shares. The fundamental difference is that stock accounts allow individuals to buy and sell stocks, while policyholders cannot do so with their account.
The demat insurance account will provide a single window for customers to see all of their insurance policies – life, car or health. When a customer purchases a policy, the insurance company credits that policy to the customer’s referral account.