Finance Minister P. Chidambaram Monday inaugurated insurance sector regulator IRDA's insurance repositories and called for making digitisation of all policies mandatory.
Chidambaram launched the insurance repository system, which will help policy holders keep insurance policies in electronic form and undertake modifications and revisions.
He urged Insurance Regulatory Development Authority (IRDA) to announce a timetable to make digitisation mandatory for both life and non-life policies. The IRDA has selected five companies to conduct repository services. Digitisation of life insurance policies under this system will be voluntary.
The companies are Database Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, CAMS Repository Services Limited and Karvy Insurance Repository Limited.
Under the system, a policy holder can open an e-insurance account with an insurance repository to buy and keep policies issues by various insurers in electronic mode. The account opening is free of cost to the account holder.
"It is a novel idea but should have been implemented long time ago. It is a modest beginning with life insurance policies," Chidambaram said and asked IRDA and depositories to quickly extend the service to non-life policies.
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The finance minister stressed the need to have more competition in offering the service to bring down the cost. He said the initial cost of Rs.150 per person per year was very high and could be brought down to Rs.20.
Chidambaram also underlined the need for digitisation of all policies as policy holders were losing their documents in natural calamities or due to migration from rural to urban areas.
He said the system will not only give peace of mind to policy holder by eliminating the risk of loss of documents or manipulation or forgery by somebody but will also help insurance companies to settle claims in the absence of papers.
According to IRDA, the new system will make it a economical preposition for insurance companies to issue and service e-policies as compared to traditional paper policies.
A policy holder can also convert existing policies (in paper form) into electronic form by submitting a request for conversion after opening an e-insurance account. Once a person has an e-insurance account, he doesn't have to go through the KYC process every time he buys a new policy.
The repository will issue a unique code number to all policy holders, and policies of those people will come under that number. It maintains the history of policy details such as claims, nominees, beneficiaries and other data.
The IRDA gave five companies the status of insurance repositories and provided them with a license valid till July 31, 2014.
The insurers can enter into agreements with one or more repositories.
Secretary, financial services, Rajiv Thakur, IRDA chairman T.S. Vijayan also attended the programme.