August 31, 2015
Will E-insurance be the next big step taken by IRDAI?
The Insurance Regulatory and Development Authority of India (IRDAI) is considering a proposal to digitize all insurance policies. Under this, policyholders will have to pay a fee if they want a physical copy of their policy.
However, general insurance executives are of opinion this could take some time – two or three years – to be implemented because insurance companies need to first clear the backlog of digitizing existing policies.
While a final timeline is yet to be announced, officials say the regulator is keen to complete the process. Holding insurance policies in the digital format reduces chances of rejection due to damage or loss of the document.
Currently, less than 2 per cent of the policies sold in the country are in electronic format. India First Insurance launched the first digitized policy in September 2013.
The Life Insurance Corporation of India, the country’s largest insurer, recently decided to issue digitized policies, after resisting the move for years. However, it is likely to do it via an internal system and not by tying up with external insurance repositories, which help policy holders buy and keep policies in electronic form.
The repositories, similar to demat accounts, hold electronic records of policies issued to individuals. These are called “electronic policies” held in an electronic insurance account.
On an average, the cost of digitization could be Rs 75-80 per person. There is also an annual servicing fee of Rs 500-900. These costs will be borne by insurers. The digital initiative, pushed by IRDAI, is expected to save Rs 100 crore a year for the sector.