Electronic insurance policy still to take off in big numbers

Digitisation of insurance policies may take some more time to take off a large scale, with customers not being too eager to convert their policies into an electronic format. Insurance industry officials said that at present while all processes have been initiated, only a small percentage of policyholders have made their policies into a paperless format.

"Customers have expressed their reluctance to have a non-paper policy that can be accessed with one number, since they are more comfortable in having a physical document," said a senior executive of a life insurance company. Insurance Regulatory and Development Authority (Irda) has not mandated customers to digitise their policies, however it is anticipated in the next 8-10 years, all processes will move into an electronic format.

An Insurance Repository (IR) is a facility to help policy holders buy and keep insurance policies in electronic form, rather than as a paper document. These repositories, like share depositories or mutual fund transfer agencies, will hold electronic records of insurance policies issued to individuals and such policies are called 'electronic policies' or 'e-Policies'.

Though Irda has only allowed life insurance policies to be digitised first, regulatory officials added that that non-life policies like health and motor will also be allowed to be digitised in the near future.

"Motor insurance policies may be digitised soon. However, we are not sure if the state transport authorities would accept motor policies in electronic format from vehicle owners. So, for the time-being, a physical document may still be necessary," said the chief claims official of a mid-size general insurance company.

Irda rules said that customers will be allowed the facility of portability, wherein they can port or shift from one IR to the other if they are not satisfied with its services. However, they will be given a new e-Insurance Account with a new number if they avail of this facility.

At present, there are more than 330 million life insurance policies and 90 million general insurance policies that are in force in the country. On an average, Irda'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 1800 million pages annually and 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.

However, all insurers have not tied-up with all repositories to digitise existing policies. Hence, if an insured shifts from one company to the other which does not have a tie-up with a particular repository, it may be difficult to maintain records. "Policyholders are preferring to wait for another 12-18 months till all tie-ups with all repositories are in place, so that they do not face any administrative issues while transferring policies," said the chief executive of a bank-promoted insurer.

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. Policyholders 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 policyholders and their nominees / assignees / beneficiaries in the respective life insurance policies, among others. Further, they also have to maintain history of claim data.