Insurance policies in demat form soon

Insurance policies in dematerialized form could soon be a reality with the Insurance Regulatory and Development Authority constituting a panel to look into electronic policies.

According to insurance companies, the issue of policies in demat form will significantly bring down costs and improve efficiency. It would also make online purchase of insurance plans much easier and benefit life as well as non-life companies. In life companies policies such a move would enable policies to be held in demat form just like mutual funds and other securities. In the non-life industry, it would facilitate trade by allowing shippers use electronic letters of credit.

The working group constituted by IRDA is headed by A Giridhar who will be the chairman of the working group. From the life industry, it will have Sandeep Bakhshi, MD, ICICI Prudential Life, Jayant Dua, MD, Birla Sun Life, V Phillip, CEO, Bajaj Allianz Life, Amitabh Choudhary, HDFC Standard Life. Garuav Garg, MD, Tata AIG Life Insurance is the sole non-life member. The group will also have representatives from the two depositories CDSL and NSDL.

"We had submitted a proposal where companies could be allowed to issue policies in electronic form with the consent of the customer. Considering that the cost of dispatching each policy ranges between Rs 40 to Rs 50 the industry will be able to reduce costs substantially if this were allowed" said SB Mathur, chief executive of Life Insurance Council. He said that while earlier an insurance policy was legally required as evidence of contract the Information Technology Act of 2000 had paved the way for issue of documents in electronic form.

While the industry is eyeing electronic policies in the form of statements through email, the IRDA wants to consider a complete overhaul of the back end as well. This would involve transferring the entire database of policyholders to a central depository such as NSDL or CDSL. However, some of the companies are reluctant to share their databases as they feel that it would increase costs and not serve much of a purpose since policies are not traded.