Keep your insurance policies in demat form

After shares, you can now keep your insurance policies in demat form. In order to reduce transaction costs and ensure swift modifications in insurance policies, the Insurance Regulatory and Development Authority (IRDA) issued guidelines for electronically issuing policies. IRDA has also laid down guidelines for repositories, which compile and store data about policyholders on behalf of insurance companies.

According to the IRDA, the objective of creating an insurance repository is to provide policyholders with a facility to keep insurance policies in electronic form. They can also undertake changes, modifications and revisions in the insurance policy with speed and accuracy.

This would enable the insurance companies to sell all the polices - life, pension and non-life , in electronic form. With the issuance of e-insurance policies, there will be efficiency, transparency and cost reduction in issuing and maintaining them. According to the guidelines, an insurer issuing e-insurance policies will have to take the services of a registered repository. All such insurance policies in electronic form will be treated as valid insurance contracts.

A certified insurance repository has to have a net worth of at least Rs 25 crores, without any foreign investment. No insurance company can hold over 10 percent or hold any managerial position . The repository has measures to safeguard the privacy of the data to prevent manipulation of records and transactions, before the commencement of operations. An insurer can enter into an agreement with one or more insurance repositories for maintaining the electronic insurance policies.

Hence, insurance buyers will now be able to open demat or e-insurance accounts for their contracts and hold the insurance policies in electronic form. Having an e-insurance account will reduce hassles for buyers. The need to provide age and address proof every time a policy is bought will not be necessary now. It will also save insurers substantial money in printing and dispatching policies.

Similar to demat account

E-insurance will be similar to the demat account for shares and mutual funds. Just like the securities market, the IRDA has proposed 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 will result in efficiency and better customer service by the insurance companies. 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 will grant licences 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 of the individual and names of the beneficiary, assignees and nominees.

Dematerialized policies will be more liquid than paper policies as these contracts can be easily assigned. Whenever the policies are assigned, the assignee will have the same rights as the policyholder.

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Any insurance policyholder or a prospective policyholder can open an e-insurance account. Opening an account will require identity proof and address proof. There would be no additional costs for a policyholder for opting for electronic policies. You will not be required to go through KYC (know-your client) procedure every time you buy a policy.