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The Insurance Regulatory and Development Authority (Irda) is likely to make digitisation of the fresh life insurance policies mandatory from October, a year after the regulator had facilitated the creation of five repositories to keep the policies in electronic format similar to equity shares in demat accounts.
While Irda chairman TS Vijayan remained non-committal on the issue stating that no time-frame had been fixed in this regard, the repositories, which had so far received a cold response from the insurance companies for this initiative, are certain about the move.
“The pilot projects are over and all the necessary processes, including the establishment of data exchange were already set up by the repositories since the regulator wanted these systems to be put in place before making the digitisation mandatory for the insurance policies. We expect that the digitisation of life insurance policies issued in future will be made mandatory from next month,” S V Ramanan, chief executive officer of CAMSRep insurance repository and services said.
Speaking to reporters on the sidelines of a seminar organised by Assocham on digitisation and enhanced FDI in the insurance sector, Ramanan said the repositories had been able to digitise only 75,000 policies till date as the companies were not forthcoming to support the initiative.
Irda had introduced digitisation as a voluntary step for life insurance companies last year. Customer will be able to store any number of policies in one single account in the electronic format and thereby avoid the possibility of loss of policy document.
There were media reports suggesting that the Life Insurance Corporation of India (LIC), the country’s largest insurance company, was not in favour of the ongoing digitisation initiative as it comes at an extra cost. Instead, it had reportedly asked the insurance regulator to provide a similar opportunity to digitise the policies in-house by the company.
There are over 300 million policies issued by the LIC and another 70 million have been issued by the private players, according to industry estimates. As the issue of the old policies is not on the agenda for the moment, almost 50 million policies are being issued every year of which 30 million policies by the LIC alone are likely to be targeted once the digitisation is made mandatory.
Repositories will charge an annual maintenance charge of about Rs 60 for keeping a policy in the electronic format apart from collecting an upfront fee of Rs 30-40 per policy. Raman argued this would in fact save a lot of money for the insurance companies as they spend Rs 700-800 on maintaining the policies.
