Demat of insurance policies: LIC mulls creating its own repository

Dematerialisation of insurance policies is being promoted by the regulator to ensure robust electronic mode of policy solicitation, servicing, and storage

After the Insurance Regulatory and Development Authority’s (Irdai’s) nudge to insurers to dematerialise existing and new insurance policies, state-owned Life Insurance Corporation (LIC) is said to be exploring all options, including creating its own repository, before taking a final call on the matter.

“We will look at all available options before taking a decision,” M R Kumar, chairperson, LIC, told Business Standard.

Currently, there are four insurance repositories: NSDL National Insurance Repository, CDSL Insurance Repository, Karvy Insurance Repository, and CAMS Insurance Repository Services.

Insurance repositories are companies that maintain the data of insurance policies in electronic form on behalf of insurers.

The regulator had floated a discussion paper on the issue and asked for feedback from the industry.

Earlier this month, Irdai Chairman Debasish Panda met the chief executive officers of several insurance companies to discuss the issue.

Insurers have to bear a cost for dematerialising insurance policies. Given the fact that LIC issues more than 20 million policies a year and has a huge base of existing policies, if it decides to go ahead with creating a repository of its own, it would reduce the expenses attached to this exercise, industry insiders said.

For the scale that LIC has, it is a good idea to create a repository of its own, they said.

LIC, so far, has not reached out to the regulator on its request of creating a repository.

An email sent to LIC seeking response on this development did not elicit a reply.

Dematerialisation entails converting physical documents into a modifiable online object. The insurance regulator has held consultations with insurance companies and asked for their views on this matter. It is like dematerialisation for shares, but the only difference is that in the case of shares, customers are allowed to buy and sell shares. In the case of insurance, it will simply provide a one-stop window for customers to view all their insurance policies, be it life insurance policy, motor insurance policy, or health insurance policy.

The regulator is promoting dematerialisation to ensure robust electronic mode of policy solicitation, servicing, and storage.

In a meeting with the industry, the regulator urged the companies to open e-insurance accounts (e-IA) for their customers, which would act as the first step towards dematerialisation.

An e-IA serves as a repository of all insurance policies that the customers have subscribed to.

The regulator is keen on developing a digital platform called “Bima Sugam” for selling, servicing, and settling claims.

Bima Sugam is a plug-and-play solution with an API (application programming interface). Sources said the regulator had asked a handful of companies to take stakes in Bima Sugam.