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News & Views


Thursday, Aug 11, 2016

Come October, you won't be able to buy most insurance policies without an e-account

   [Source : The Economic Times]

he insurance industry is all set to witness a digital revolution soon. Come October 1, 2016, insurance policies will be issued in electronic form. It is similar to buying shares online, after which they are stored in demat form. Most policies, including all motor insurance and overseas travel insurance policies, will only be purchasable in demat form. Therefore, you will need an e-Insurance Account (eIA) to buy or renew most policies from October 2016.

As of now, insurance repositories are in place for existing physical policy documents to be converted into demat form, but October onwards issuance of policies will also be in demat form. The Insurance Regulatory and Development Authority of India (Issuance of e- Insurance Policies) Regulations, 2016 lays down the guidelines for the working of digital insurance policies.

The benefits of e-insurance to a policyholder could be similar to what demat accounts brought to investments in securities, including stocks, bonds. From filling up the application form to making payments online to the issuance of the policy document, the entire process could soon be paperless.

Just imagine not having to apply for a duplicate policy document, which entails a lengthy process, including filing an FIR and preparing indemnity bonds. Now maintaining and managing policy documents, records across multiple companies will also be done away with.

"More importantly, customers will no longer be vulnerable to being cheated by fraudsters fabricating and forging policies since digital policies will be authentic," says Easwara Narayanan, Chief Operating Officer, Future Generali India Insurance.

A single-view platform should certainly improve policyholder experience over time. But it seems the response hasn't been encouraging so far. SV Ramanan, CEO, CAMS Repository Services, informs, "Response to the e-insurance account has been lukewarm so far. The reason being it's still not well known in the market. The policyholder trusts the recommendation of the sales person or the insurer, and this hasn't been their priority at the moment."

All the stakeholders, including repositories and insurance companies, therefore, need to create some sort of awareness. Anil Chopra, Group CEO & Director, Bajaj Capital, says, "Acceptability and usage of e-Insurance Account is a big challenge from both the categories. The non-awareness about this facility and not promoting of eIA from insurance companies is a big hindrance. Hence response is low in both the segments."

So if a policy renewal is coming up, especially if it involves car insurance, then make sure you already have an e-account. Ramanan says, "All motor policies are new policies with new policy numbers at the time of renewals. So this new regulation would cover all renewals as well. The e-Insurance Account opening would be facilitated by the insurer and policyholders won't be inconvenienced."

Based on the sum assured and premium amount, the regulator (IRDAI) has prepared a grid for compulsory issuance of insurance policies in the electronic form. It, more or less, brings all policies into the electronic mode. (See table below)

The regulator has already mandated issuance of e-Insurance policies in disaster-prone and other vulnerable areas. Mohit Rochlani, Director of Operations and Claims, IndiaFirst Life Insurance says, "As long as there is connectivity and customer is technology-savvy in these areas, it would be feasible to issue electronic policies."

Location may not be a constraint anymore and with technology, servicing could be easier. "Considering the physical limitations which disaster prone and vulnerable areas may have, issuing electronic policies from a suitable location and having them deposited into eIA will be a sensible option." says Narayanan of Future Generali India Insurance.

As of now, the insurer issues a physical copy of the document to the policyholder. The document is a policy contract between the insurer and the policyholder and has a legal standing. Most insurers, however, have already starting sending a soft copy in addition to physical document.

To do away with the physical nature of documents, one will have to open an eIA with any insurance repository to hold the insurance policies in an electronic form. There are five registered insurance repositories in the country, including Karvy Insurance Repository, Central Insurance Repository, CAMS Repository Service, NSDL Database Management and SHCIL Projects.

Rochlani says, "Since the majority of the insurance companies have already made tie-ups with insurance repositories so issuing of electronic insurance policies should not be a major challenge in terms of the timelines as per the regulations although there have been a few clarifications sought by the industry through life insurance council on these regulations."

Initial hiccups

The opening of an eIA may, however, have its own challenges. The buyers of new insurance policies would require an eIA and even the existing policyholders can opt to open an eIA account to hold their policies in the digital form.

The services of the insurance agent can come handy for it. Nilesh Parmar, COO, Edelweiss Tokio Life, says, "In the immediate term, we do see some disruption on account of mandatory issuance of e-insurance policies for all online customers. Convincing customers of the need to open an eIA account and the actual process of opening this account for the vast majority of customers who don't have this account could lead to some challenges."

Instead of filling physical forms, one will be required to fill up an e-proposal form. As far as the digital reach is concerned, there are still large areas of the country where this may not be possible. "Extension of this to small cities and villages and to the policyholders who are not Internet-savvy is challenging," says Chopra. In that case, the physical version of e-proposal form will be required to be filled up and then the insurer will have to convert the furnished information into electronic version.

"Companies may have to organise digital signatures, apart from initiating arrangements with repositories for opening electronic insurance accounts. These are not major challenges," says Narayanan.

Conclusion

The emergence of digital platform in insurance will bring about not only safety and convenience but also a reduction in premium. Regulations allow discounts to be offered, and how it changes the scenario in the insurance industry in future remains to be seen.

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