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2/23/2012 9:30 PM Thursday
Tired of maintaining a file for your insurance policies and premium receipts? Well, very soon electronic policies could be the answer to your problem. Stocks, mutual funds and bonds can already be held in demat accounts. It is surprising that life insurance policyholders are required to maintain a physical copy of the insurance policy over the entire tenure, when it would be much easier to save the document and make it accessible online.
In an important move, the Insurance Regulatory and Development Authority (IRDA) has given the green signal for the electronic issuance of insurance policies starting April 2012. Simply put, this will allow you to store all your policies electronically under one virtual roof. For starters, only life insurance policies – including pension plans – can be dematerialised. Going forward, the regulator plans to extend the same provision to health and motor policies.
IRDA has initiated the process by calling for applications to create insurance repositories, independent licensed entities that will not only enable the issuance of online policies but will also function like the data hub for electronic policies. The repositories will be linked to all insurance companies, and will maintain records such as e-insurance accounts with a unique number as also e-insurance policies issued and those reconverted into physical form. It will also take care of the assignment of electronic insurance policies, the history of claims data and will be an index of policyholders and their nominees, assignees and beneficiaries in respective life insurance policies, along with storing the records of all claims made or loans taken against policies. In-principle approval has been granted to NSDL, CDSL, Karvy, CAMS and STCI to function as insurance repositories.
Customers with a policy can open an account themselves by submitting the policy conversion request and the policy document to the repository. In case of old policies, the repository will intimate the policyholder after the account is opened and updates are made. Policyholders can view all these details by logging into their e-insurance account using the login ID and password provided by the repository. In case of new policies, the insurer will forward these to the approved repositories set up specifically to facilitate the process.
Experts are excited by this new development, as they feel that electronic insurance will result in a great deal of convenience and will cause ownership of insurance to become more widespread, just as dematerialisation of equity shares did for the stock markets. Dematerialisation of insurance policies is expected to make the transaction process fast, lower costs and eliminate frauds.
Among the biggest advantages of such a move is the convenience – you needn’t go through the KYC (Know Your Consumer) compliance procedure each time you buy a policy. If you own multiple policies, all of them will be reflected in a single account and keeping track of them will become easier. E-insurance is also expected to make switching insurers easy, as companies will have fast and easy access to applicants’ claims history and other details. (Health insurance becomes portable from July 1, 2012.)
In the case of individual policies, if at a later stage, there is a need to modify personal details like the address, policyholders currently have to approach each insurer individually. However, with an e-insurance account, they would need to intimate the repository only once. Nominees will also now heave a sigh of relief, as they will not have to run around looking for documents when making a claim. Also, the repositories will facilitate the processing of service requests, which are only serviced through the agents or branches of the insurances companies as of now. Assigning a policy to take a loan against it will also be simpler through this route.
Of course, don't conclude just yet that e-insurance is a panacea for all your insurance-related woes. You will still have to contact your insurance company or agent for some services. As things stand now, policyholders will only be able to view the basic data through the account initially. For information on the fund value of your ULIP, for example, you will still have to approach the insurance company. While e-insurance promises to eliminate several layers of communication that delay procedures, don’t forget that your agent’s services may come in handy at the time of making a claim.
You will be able to open an e-insurance account at no extra cost. Since insurers will be able to save on expenses, the cost advantage may be passed on to you, though it is too early to confirm that. As of now, electronic policies will not be made mandatory – you will have the option to get a physical policy if you are not comfortable with e-insurance. Also, should the need arise in the future, you can get the electronic policy converted into a physical version.
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