IRDA issues insurance demat norms

Insurance buyers will soon be able to open demat or 'e-insurance' accounts for their contracts which will allow them to hold policies in electronic form. Having an -insurance account will reduce hassles for buyers as it does away with the need to provide age and address proof every time a policy is bought. It will also save insurers crores in printing and dispatching policies.

The move will bring in benefits similar to the efficiency gains in the capital markets after Sebi introduced dematerialization of equities. Dematerialization in capital markets speeded up transactions, dramatically reduced transaction costs and completely eliminated fraudulent transactions.

Taking a leaf out of the securities market, the Insurance Regulatory and Development Authority wants to create insurance repositories on the lines of securities depositories like the National Securities Depository or the Central Securities Depository. These repositories will be licenced by the regulator and connected to all insurance companies.

"This is one of the most positive steps which will impart efficiency and better customer service," said Sandeep Bakhshi, MD, ICICI Prudential Life Insurance. He said the benefits in terms of convenience to policyholders will be enormous while insurers will save in costs. Since the repository will consolidate all policies under a single account, the family will immediately come to know of the policies purchased by an individual in an emergency.

IRDA on Thursday issued guidelines for creating the insurance repositories and electronic issuance of policies. In the guidelines, the regulator said that it will grant licences to and regulate 'insurance repositories', which will act as service providers to life insurance companies.

The repository will give a unique number to every individual and all his policies will come under that account. It will hold all types of policies, including life, health, motor and group covers. The data maintained by the repository will include history of the claims data of the individual. It will also have the names of the beneficiary, assignees and nominees.

Dematerialized policies will be more liquid than paper policies as these contracts can be easily assigned. IRDA has said that whenever the policies are assigned, the assignee shall have the same rights as the policyholder. According to the IRDA guidelines, any insurance policyholder or a prospective policyholder can open an e-insurance account. Opening an account will require identity proof and address proof.

But not all companies are in favour of full-fledged dematerialization. Some of the players were not very keen to have a depository right now and they wanted only partial demat. Even the Life Insurance Corporation is not keen on giving that option to all policyholders immediately as it has a very large database and has concerns of data security.