One year on, e-insurance still to catch up

Not even 10% of all policies in the industry have been digitised, due to resistance from both, industry players and customers

A year ago, the Insurance Regularity and Development Authority of India, or Irdai, piloted the concept of insurance in paperless form through insurance repositories. However, not even 10 per cent of the total number of policies in the industry has been digitised due to both the reluctance of some industry players because of costs involved and the customers, who still prefer physical policy documentation.

The regulator is now mulling on making digitised policies mandatory for insurance with a premium of above Rs 50,000. Industry sources said that revised guidelines on insurance repositories will be brought out by Irdai to make it mandatory for insurance be in electronic format from June-July onward.

The country’s largest insurer, the Life Insurance Corporation of India (LIC), has not yet begun to offer e-policies to all its customers. A senior LIC executive explained that the insurer would have to spend several crores of rupees for this initiative, and ultimately it will be the policyholders who will have to bear the costs. “We have not taken it up due to the costs involved. Also, we have not had customers even requesting us for this facility,” the executive said.

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, would hold electronic records of insurance policies issued to individuals. Such policies are called “electronic policies”, e-policies for short. The government has mandated five companies to act as repositories, include NSDL Database Management Limited, Central Insurance Repository Limited, CAMS Repository Services Limited, SHCIL Projects Limited and Karvy Insurance Repository Limited.

While the results may not be tangible yet, insurers have been engaged in active campaigns to highlight the importance of holding insurance in a digital format, including risks like loss or damage of policy documents that may lead to claim rejection.  

HOW TO DIGITISE A POLICY

• A customer goes to a repository website and enters his/her information. An e-Insurance account is created free of cost (where the insurer pays for these expenses)
• In the new forms, there is a tick-mark option on the policy form for offering a digital policy and e-Insurance account creation
• An e-Account number is generated for each customer, which is a unique id. Each user can only open one account.
• All KYC related information is fed into the account. When new policy is bought, only e-Insurance account number to be quoted; no separate KYC document needed
• All future policy details are immediately sent from an insurer to the insurance repository
• All payments and policy-details can be viewed
• Agents can also view details of policies that they have sourced on this common platform
• Premium reminders, renewals, fund-value and other details can be viewed
• If a customer has any queries, the same e-Insurance account can be used to communicate with the insurer

Though different insurers have separate arrangements with  insurance repositories, on average the cost of digitisation could be Rs 75-80 per person. Apart from this, there is an annual servicing fee ranging of Rs 500-900. Policyholders are not required to pay for the digitisation at this stage. However, industry officials say that they may need to pay service fee at a later stage.

Because there are a number of repositories, insurers see a problem in the form of data shifting in case of movement from one repository to another. The chief executive of a mid-size life insurer said that the regulator should have started with only one repository in the initial stage. “The costs would also have come down significantly for us, since we wouldn’t have to pay all the repositories. Rules mandate insurers to tie-up with all the repositories, but customers moving from one repository to another may not have ease of documents being transferred,” he adds.

At present, there are more than 330 million life insurance policies and 90 million general insurance policies that are in force in the country. Irdai estimates that annually Rs 150-200 is spent per customer by an insurance company in maintaining policies in physical form.

This initiative by IRDAI 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. IRDAI 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. 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.