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Union Finance Minister P Chidambaram has asked the Insurance Regulatory and Development Authority (Irda) to prepare a time frame for mandatory digitization of all the insurance policies in the country.
The minister today formally launched the Insurance Repository System (IR), a first of its kind initiative in the insurance sector across the world, which would enable policy holders to buy and keep insurance policies in dematerialised or electronic form.
While the policy holder can keep multiple policies under one e Insurance Account issued by the authorities in the new system, the digitization also allows to reduce the cost of managing accounts at the insurer end.
Irda has introduced the the demat system for insurance policies, both the existing and the new ones, only in the life insurance category on a voluntary basis to begin with.
Chidambaram said the insurance sector needs to quickly move to the digitization from the voluntary to the mandatory phase as this initiative entails multiple benefits both at the customer end and the insurer end.
It ‘s been 10 years since the share certificates were mandated to be put in demat form. The present initiative has to be quickly extended to all forms of insurance policies, he said. One of the benefits of this initiative would be to eliminate the possibility of the physical documents getting lost in un foreseen circumstances like calamities.
“Not a year passes with one part of the country going through a storm, an earthquake or a calamity similar to that happened recently in Uttarakhand. People migrate from rural to urban areas in large number and in the process they will have difficulty in establishing their identity to claim insurance benefits among other things,” Chidambaram said.
He asked the insurance companies to open camp offices in Uttarakhand to quickly settle the claims of families who had lost their loved ones or the houses and other properties. Losing the physical documents in such circumstances also give the scope for undesirable elements to make money, he said.
Irda has already issued licenses to five entities-NSDL Data Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, Karvy Insurance repository Limited and CAMS Repository Services Limited to act as IRs. The Finance Minister said in the future more entities should come forward to offer the repository services to enable healthy competition.
The e-account opening is free of cost for the account holder even though the IRs will be paid by the insurers for these services as they are expected to save the costs.
