Digitised policies to soon be mandated for high premium policies

Digitised polices might soon be mandated for insurance policies with a premium of above Rs 50,000. Sector sources said revised guidelines are soon to be brought out by the insurance regulator that will make it compulsory to have insurance only in an electronic format from June-July.

Insurance repositories will be involved in the process of maintaining these policies in a digital format. It is being proposed that all companies would have to offer these policies to the said customers above the certain premium.

An Insurance Repository (IR) is a facility to help policyholders buy and keep insurance policies in electronic form, rather than as a paper document. Such policies are called ‘electronic policies’ or ‘e-policies’.

Though the Insurance Regulatory and Development Authority of India (Irdai) has only allowed life insurance policies to be digitised first, regulatory officials added that non-life policies like health and motor would be allowed to be digitised in the near future. It is expected that by the end of this calendar year, digitisation would be extended to the general insurance sector as well.

Both private insurers and Life Insurance Corporation of India have tied-up with the repositories for digitisation of policies. In the pilot stage, several thousand policies were digitised. Campaigns are also being run by life insurers like ICICI Prudential Life Insurance to inform customers about the benefits of holding policies in a digital format.

According to Irdai rules, customers would be allowed the facility of portability, wherein they could port or shift from one IR to the other if not satisfied with its services. However, they would be given a new e-insurance account with a new policy number if they avail of this facility.

At present, there are about 330 million life insurance policies and 90 million general insurance policies that are in force in the country.

On an average, IRDAI's estimates suggest that annually Rs 150-200 per customer is spent by an insurance company annually in maintaining policies in physical form. This initiative by Irda is expected to save more than Rs 100 crore for the industry.

The five companies include NSDL Database Management Limited, Central Insurance Repository Limited, CAMS Repository Services Limited, SHCIL Projects Limited and Karvy Insurance Repository Limited. Irda has recently clarified in its regulation on insurance repositories and said that insurers can enter into agreements with one or more repositories.

The objective of creating an insurance repository is to provide policyholders a facility to keep insurance policies in electronic form and to undertake changes, modifications and revisions in the insurance policy with speed and accuracy in order to bring about efficiency, transparency and cost reduction in the issuance and maintenance of insurance policies. Policy holders have an option to choose to either digitise their policy or to have it in the existing format.

These repositories are required to maintain records of e-insurance accounts with an unique number, records of e-insurance policies issued and records of e-insurance policies converted back into physical form, index of policy holders and their nominees/assignees/beneficiaries in the respective life insurance policies, among others. Further, they also have to maintain history of claim data.