A few players feel agents might lose touch with customers due to the online interface. Smaller insurers are worried about the additional costs involved in holding policies in an electronic form.
Last year IRDA had announced its intentions to allow individual policyholders to hold their policies in an electronic form. Insurance Repositories were to hold the electronic records of policyholders. Though the regulator has not yet issued the final notification, the industry is getting ready for demat policies... and a few insurers have some reservations.
The benefits of holding policies in an electronic form are obvious: no risk of loss or damage to policy; convenience of anytime, anywhere access to policy documents and elimination of paperwork.
While depositories and IRDA are busy with the groundwork for initiating the process, sources close to the development indicate that a few insurers are not willing to offer demat services to clients due to various reasons. Public sector giant LIC feels that such an option will erode the relationship between its agents and clients, leading to loss of business. “LIC agents are known for their service. If LIC offers a demat option, most agents will be out of business, because policyholders can track their policies with just a click,” said a top official close to the development, preferring anonymity.
Small insurers like ING Vysya, Sahara Life and Aegon Religare are concerned over the additional cost involved when demat is rolled out. Again, since it is not compulsory for policyholders to switch to demat accounts, these insurers are not confident if the benefits arising from the move justify the increase in costs.
IRDA has already selected five data repositories—CAMS Repository Services Ltd, Central Insurance Repository, NSDL Data Management, Karvy Insurance Repository and SHCIL Projects—who will maintain electronic data pertaining to insurance policies and offer demat services. All the big private players (HDFC Standard Life, ICICI Prudential Life, Bajaj Allianz Life and Reliance Life Insurance) have agreed to offer demat policies.
“IRDA is in talks with the depositories to finalise the process of demat and we will soon see dematerialisation of policies rolling out,” says SB Mathur, Secretary General, Life Insurance Council.
A few advisors are ready for demat. “Dematerialisation of policies will reduce our workload. Customers will not be in trouble if they lose their policy,” says Pradip Agarwal, MDRT member from Kolkata.
But another IFA had a different opinion. “It’s better to hold your document in a physical form because all the contract details are explained in a detailed manner, which might not be available in a demat form. Moreover, a physical copy of the insurance policy keeps agents engaged with a client and helps us to build a personal rapport. This cannot happen if the policy is in a demat form,” says Sadashiv Phene, a Mumbai-based IFA.
The facility will be first available for the 23 life insurers, and then it will be rolled over to general insurers. IRDA has still not announced the standard tariff for demat services. But a rough estimate indicates that the incremental costs would be high, as there are huge data transfer and database maintenance costs involved. For now, all players are waiting to see how the dematerialisation process rolls out.