LIFE INSURANCE POLICIES IN DEMAT FORM TO BE A REALITY SOON
Very soon IRDA is going to make it mandatory for all Life insurance companies to issue policies in Dematerialized form. According to IRDA all Life Insurance companies should link their systems to insurance repositories with an option to hold policies in electronic form.
NSDL Database Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, CAMS Repository Serviced Limited and Karvy Insurance Repository Limited these are the five authorized insurance repository service providers.
Insurance repositories are the same like depositories in the capital markets. Investors needs to open only one time depository account, the repository requires policyholders to open an e-insurance account free of charge.
The service was incorporated from September but as on today only 1 lakh e-insurance accounts have been opened and some thousand policies have been dematerialized. The reason behind this performance is only 10 insurance companies have signed up to provide demat policies out of 24 companies. Soon many are expected to follow suit.
Demat policy is beneficial for both the customer as well as the insurance company. Since it is in demat form there is no requirement for submission of original policy at the time of maturity or death claim. The question of loss of policy documents will not arise. This can be a boon to many policy holders as it will do away with having to store the physical policy in a safe place. Being in a soft form, it can be accessed anytime.
The insurance companies would be benefited as most of the back office work sending reminders and maintaining records would be undertaken by the repository. This will be similar like Mutual Funds industry where most of the back office work is taken care by the registrar and transfer agents. It helps to save huge costs for companies.
Also a one time KYC has to be done.
(as reported in Economic times on 22nd May)