A proposal to digitise all insurance policies has been presented to the Insurance Regulatory and Development Authority of India (IRDAI). As per this, policyholders may have to pay a certain fee if they wish to keep a physical copy of the policy.
General insurance executives said that this could come into force in the next 2-3 years time since the industry has to first clear the backlog of digitising existing policies.
While a final timeline is yet to be announced, officials said that the regulator is keen on getting this done.
Even the country's largest insurer Life Insurance Corporation of India, the country’s largest insurer, has decided to issue digitised policies, after resisting such a move for some years.
India First Insurance launched the first digitised policy in September 2013. Less than two per cent of the policies sold in the country are in electronic format.
An insurance repository is a facility to help policy holders buy and keep policies in electronic form, rather than as a paper document.
These repositories, like share depositories or mutual fund transfer agencies, would hold electronic records of policies issued to individuals. These are called 'electronic policies' or 'e-policies’, held in an electronic insurance account.
It is also being proposed that all high-value policies be mandatorily in digitised form. Different insurers will have different arrangements with each repository but, on an average, the cost of digitisation could be Rs 75-80 per person. There is also an annual servicing fee of Rs 500-900. These costs will be borne by insurers.
Insurers have been engaged in active campaigns to highlight the importance of holding insurance in a digital format, which protects a policy document from damage or loss, leading to possible claim rejection.
The sector regulator's estimates suggest Rs 150-200 per customer is spent by a company annually in maintaining policies in physical form. The digital initiative, pushed by IRDAI, is expected to save at least Rs 100 crore a year for the sector.