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Thursday, November 3, 2016

E - Insurance Accounts are not must

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New regulations make it mandatory to issue e-insurance policy for insurance cover of a certain ticket size. Find out how e-policies can be delivered to you





Insuring yourself and your assets is important. But equally important is to keep your policy documents safely. Storing them digitally is a good option and to help you do that, the Insurance Regulatory and Development Authority of India (Irdai) allowed dematerialising of policies in 2013, so that a policyholder may keep all the policies together in an e-insurance account.


Dematerialisation is the process of converting physical financial instruments into an electronic format. For instance, an investor who needs to dematerialise her shares needs to open a demat account with a depository participant.


Further, from October this year it is mandatory to issue big-ticket policies as e-insurance policies. So, what is an e-insurance policy and is an e-insurance account now mandatory for buying insurance? We find out.


What is an e-insurance policy?

An e-insurance policy is an electronic version of the physical policy document. There are two ways to get it. The insurer can email it to you as a PDF document, and if you have an e-insurance account the policy can be dematerialised and stored in your account.


It's not mandatory to have an e-insurance account to buy a policy. But if the policy is of a certain ticket size, then it is mandatory to issue the policy in an electronic form. So when a person who doesn't have an e-insurance account buys a policy, the insurer will have to send a PDF version and also the physical version. But if the person has an e-insurance account, she needs to give the account number and the policy is tagged to the account and is dematerialised.


And that's the big difference between an e-insurance policy and dematerialised policy. If the policy is digitised by the insurance repository, it becomes a 100% digital policy. No physical policy bond is required. Only insurance repositories are authorised to provide the policies in dematerialised form. In case an insurer issues it, it is just an electronic copy of the original policy. A physical policy is needed in this case. E-policies need to have a digital signature of the insurance company.



When e-insurance is a must

For policies of certain ticket size, e-insurance is mandatory (see table). However, all motor and overseas travel insurance policies need to be issued electronically.


Some dealers of car companies don't share data with the insurers as they issue the policy directly on behalf of the insurer. But now insurers will have to issue the policy directly, which means they will have the data of the policyholders. This will improve renewability, especially in the two-wheeler segment, where 75% of the policies don't get renewed after the first year. Having data of policyholders, including claim trends, means that insurers will be able to price the products better



The issues with e-insurance

But issuing an electronic policy to all policyholder is not without challenges. We can offer an e-policy only when the customer gives us an email ID. However, for customers who do not provide or don't have email-like many who buy two-wheelers-we can't issue a soft copy. We are already issuing physical and soft copies to our customers, along with the quick response code that can be used for policy validation


The other option to obtain a digital policy is through an e-insurance account, which lets you hold all your insurance policies in a demat form in one place. Currently there are four insurance repositories, through which you can open this account: NSDL Database Management Ltd, Central Insurance Repository Ltd, Karvy Insurance Repository Ltd and CAMS Repository Services Ltd. You can approach them directly or through the insurance companies. Insurers have to give three options to the policyholders: quote the e-insurance account number so that the policy can be dematerialised and tagged to the account; if the customer doesn't have an account then send the PDF and physical copy of the policy if it's above a certain ticket size; or if the customer chooses to open an e-insurance account then the insurance company has to facilitate the process and subsequently dematerialise the policy



It is easier to dematerialise a life insurance.  In the case of life insurance, other than Life Insurance Corporation, all companies have tied up with at least one insurance repository and about 21 of the 24 companies have a tie-up with all the repositories. This makes dematerialisation much easier



However, dematerialisation has only just begun with non-life companies. Tie-ups have happened but the systems are beginning to get integrated only now. It should pick up in a few weeks, and will first start with health and motor insurance



The insurance industry is finding ways to adopt technology to change the way you buy and hold your policy. But don't worry, if you don't have an e-insurance account yet. You can still buy insurance.



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