Don't rush to demat insurance policies

If your e-account doesn't match the insurer's repository, the policy would have to be held in physical form

Buying an e-policy? Mix and match first.

Sample this: You have an e-account with Central Insurance Repository, while your insurer has a repository tie-up with Karvy Insurance. In this case, converting any existing policy to e-format or buying an e-policy from the insurer makes little sense.

A few months ago, the Insurance Regulatory and Development Authority (Irda) had asked insurance firms to launch e-policies. Most insurers have launched e-policies, and these are cheaper 80 per cent, in terms of processing costs for insurers. However, they are yet to tie up with all five repositories — NSDL Database Management, Central Insurance Repository, SHCIL Projects, Karvy Insurance Repository and CAMS Repository Services. Irda hasn’t made it mandatory for insurers to tie up with all repositories. “The infrastructure for the dematerialisation of policies is in a nascent stage. Soon, every insurance company would tie up with all the five repositories, as proposed by Irda, not restrict the tie up to only a few,” says Frederick Dsouza, senior vice-president (underwriting), HDFC Life.

Assuming one holds policies of LIC, Bajaj Allianz Life Insurance, HDFC Life, Reliance Life Insurance and Max Bupa. Given HDFC Life has tied up with NSDL Database Management, Central Insurance Repository and SHCIL Projects, you could hold an e-account with any of these three repositories. What if all the others decide to tie up with the remaining two repositories? Then, you would have to hold some policies in physical form and others in demat form. Therefore, it is suggested till there is more clarity on insurer-repository tie-ups, do not hurry to demat your policies. P Ravi Kutumbarao, head (technical), Bajaj Allianz Life Insurance, says, “According to existing guidelines, an individual can hold e-policies pertaining to only those insurance companies that have tied up with the repository where he/she holds an account.”

Another insurer says the industry is negotiating on the cost of digitising policies and annual servicing fees. Currently, the cost of issuing a policy and, subsequently, maintaining it stands at about Rs 500 a policy for insurers. Digitisation would reduce this cost to Rs 100, insurers say.

Currently, policyholders can open e-insurance accounts free of charge. Also, insurers do not charge a fee for converting existing policies to demat form. For this, however, repositories charge around Rs 100. These also charge Rs 100 for account maintenance and up to Rs 50 for servicing requests.

E-insurance was primarily introduced to allow the insured to maintain all their policies — life, pension, health or other general insurance plans — in a single demat account. This would have made things easier, in terms of maintaining records.