Insurance Regulatory and Development Authority (IRDA), the industry watchdog, is planning to make it extremely easy to handle insurance needs where all you require is an insurance account number and the policies get saved in a digital form not requiring any paperwork.

In order to permit the life insurers to dematerialize life insurance policies, just like company shares, IRDA awaits the proposal of Life Insurance Council, as reported by Anirudh Laskar of MintIndia.

"Once the recommendations come to us, we will approve it," said a senior IRDA official. "Insurance policies in demat form will help in smoother expansion of the industry, lower distribution costs, and higher transparency regarding benefit illustrations and costs involved for a policyholder."

As stated by S.B. Mathur, the council’s secretary general, IRDA is expecting recommendations from a 12-member committee of the Life Insurance Council. Dematerialization (demat) refers to holding a venture in an electronic form. There are two depositories-National Securities Depository (NSDL) and Central Depository Services (India) (CDSL) that jointly hold and supervise all demat accounts in the country.

An inspection is being conducted in order to ascertain the suitability level of the technology available at NSDL and CDSL and to also gather the mandatory information regarding the different types of policies to be handled by depository houses. Currently, at least 16 million investor accounts are collectively managed by the two depositories.

The equipped disclosure of all policy-related information that combines both commissions and fees paid to the company, accurate benefits accessible, quality payment and renewal-related dates are the biggest advantages of a demat form for insurance. This move has been made to ascertain that customers do not get cheated due to their ignorance about commissions paid and terms of risk cover.

"Typically, a company incurs (a cost of) Rs20 per policy, merely as paperwork and distribution costs," said Mathur of Life Insurance Council. "Fifty million policy sales would simply mean costs of nearly Rs100 crore for the industry."

The failure of the claimant fails to provide policy documents leads to the insurer issuing an insurance bond against the recipient and hands out a notice with regards to the maturity of the policy and its recipient in a national newspaper. The amount is handed over to the first claimant if nobody comes up within three weeks tenure after the notice has been published.

"We have the required infrastructure in place," Paresh Parasnis, principal officer and executive director of HDFC Standard Life Insurance said. "But practically, all policies have different terms and conditions. Policyholders often avail loans against their policies, which involves banks. The attempt is to bring all aspects of the policies under one system of the depositories."
Source : www.siliconindia.com