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Dematerialisation of insurance policies

Team AckoNov 29, 2022

Dematerialisation has overtaken the conventional paper-oriented process in the stocks. Due to recent Government mandates, the same is likely to happen in the insurance sector too. This article discusses the upcoming compulsory dematerialisation (Demat) of insurance policies. It also lists the steps involved in starting a Demat account.

Dematerialisation of Insurance Policies

Contents

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What is the dematerialisation of insurance policies?

Dematerialisation is a process of transforming physical policy documents into digital format. This digital copy gets stored in the policyholder's e-insurance account (e-IA). The dematerialisation of all insurance policies by December 2023 has been mandated by the Insurance Regulatory and Development Authority of India (IRDAI). This initiative aims to remove paperwork and physical policy documents.

Highlights of dematerialisation of insurance policies

Here are some insights about the dematerialisation of insurance policies.

  • Insurance policies will be provided in a digital/Demat format from December 2022.

  • Existing physical insurance policies are to be converted to electronic documents by December 2023.

  • Insurance companies will bear the cost of this physical to digital-conversion process.

  • E-KYC will become compulsory for all insurance policies from November 2022. This is to aid in the dematerialisation process.

  • Insurance repositories will store the electronic documents in e-IAs.

  • There are currently five insurance repositories.

  1. CAMS Insurance Repository Services Ltd.

  2. Central Depository Services (CDSL)

  3. National Securities Depository Limited (NSDL)

  4. Karvy Insurance Repository Ltd.

  5. NSDL Database Management Limited

  • The insurance repositories will be subject to regulations.

Benefits of the dematerialisation of insurance policies

Here are the key benefits of the IRDAI-sanctioned dematerialisation.

  • Ease of doing business for insurance companies.

  • It makes insurance policies more affordable and easy to put in place.

  • The insured and their nominees can access a portfolio of insurance policies from one place.

  • The insured can remotely view details like policy expiry dates, nominee details, maturity status, etc.

  • The insured can make edits to their residential address and nominee details at any time.

  • The insured can download the policy documents of their insurance policies.

  • No paperwork will be involved while buying/renewing policies or raising claims.

  • Safeguarding physical insurance-related documents is no longer necessary. The soft copies of policies will be digitally secured.

  • A lot of paper will be saved while issuing insurance policies.

  • Eliminating printing and dispatching physical policy documents also reduces operating costs for insurers.

  • Banks may find it more convenient to grant loans against insurance policies.

  • Reduced likelihood of agency fraud since intermediaries are not involved.

  • An automated process for insurers and a hassle-free digital experience for the insured.

Disadvantages of Demat policies

The following are some of the key disadvantages of a Demat policy.

  • The insured cannot trade their policies over a Demat account.

  • Possible cost concerns and operational challenges for insurers.

  • A repository account may accommodate lesser policies than a typical Stock Demat account.

Dematerialisation of insurance policies

IRDAI has mandated the dematerialisation of the following policies.

  • Dematerialisation of Car Insurance Policies

  • Dematerialisation of Bike Insurance Policies

  • Dematerialisation of Health Insurance Policies

  • Dematerialisation of Life Insurance Policies

How to open an insurance Demat account

Follow the below-listed steps to open an insurance Demat account.

  • Step 1: Download an e-insurance account application form from an insurance repository website.

  • Step 2: Fill out the form and share it with your insurer.

  • Step 3: The repository will generate a unique e-insurance account number. Share the same with your insurer.

Once your account has been created, you will receive a notification.

Frequently asked questions

Here are answers to popular questions on the dematerialisation of insurance policies.

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What is a Demat policy in insurance?

A Demat policy is an insurance policy that is saved digitally in e-IA.

What will happen if a Demat account holder dies?

If a Demat account holder dies, their policies will be transmitted to their nominees. However, this process is not automatic and requires initiation.

Is it mandatory to possess only Demat policies?

Yes, by December 2023, all new and existing policies need to be in Demat format.

Who are the beneficiaries of this IRDAI-mandated dematerialisation process?

The beneficiaries of this IRDAI-mandated dematerialisation process are the insured, insurers and repositories.

How is the IRDAI benefiting from the digitisation of insurance policies?

The IRDAI benefits from digitising insurance policies by being able to oversee and regulate policies via a single platform.

Will I have to pay to convert my insurance policy from a physical to a digital format?

No, you do not have to pay to convert your insurance policy from a physical to a digital format. This cost is likely to be borne by your insurance company.

What are the eligibility criteria to open a Demat account?

You need to be an Indian citizen and above the age of 18 to be eligible to open a Demat account.

What documents are required for opening a Demat account?

The following are documents required for opening a Demat account.

  • Identification proof

  • Address proof

  • Date of birth proof

  • PAN card

Will I be reminded about policy renewal if I hold a Demat account?

Yes, you will be reminded about policy renewal if you hold a Demat account.

Is KYC verification required while buying policies if I have a Demat account?

KYC verification is required only once while setting up a Demat account. Following that, you do not need KYC verification while buying insurance policies.

What is an insurance repository?

Insurance Repository is a company that is certified by IRDAI to digitally store insurance policies.

Can I buy insurance from an insurance repository?

No, you cannot buy insurance from an insurance repository. You can only store your insurance policies.

Can I have more than one e-IA?

No, as per IRDAI regulations, you can only have one e-IA.

Is it possible to switch from one insurance repository to another?

Yes, it is possible to switch from one insurance repository to another.

Reference:

  • https://www.outlookindia.com/business/irdai-plans-to-dematerialise-all-insurance-policies-what-it-means-for-you-news-222304

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.

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