Dematerialization of insurance policies was slow due to operational hurdles and lack of clarity in fee structure.
After getting a poor response for insurance repository from insurance firms, IRDA has decided to launch a pilot project in which it has mandated insurers to issue or convert insurance policies in electronic form. The project will kick off from July 1, 2014.
During this two-month-long project, all life insurance companies are required to convert at least 5% or 1,000 policies each from existing and new individual policies in electronic form.
Earlier in September 2013, IRDA had launched the insurance repository services. However, the service didn’t took off well due to operational hurdles and lack of clarity in fee structure.
In a circular, IRDA said, “After the IRs have become operational, several teething issues with respect to the function of the IR system, processes, security and price related concerns have come to the notice. In addition to these concerns, it was observed that one of the critical reasons affecting a smooth take off of the IR system is failure on the part of the Insurers and IRs in arriving at a price structure commensurate with the scope of services being offered and volumes involved.”
The national sales head of a private life insurer told Cafemutual that the insurance regulator had earlier constituted two sub committees to examine and devise the simplified process. In fact, IRDA has come out with the pilot project on the basis of recommendations of these two committees, he added.
Insurance repositories will help policy holders buy and keep their insurance policies in electronic form. It will hold electronic records of insurance policies issued to policy holders. Policyholders can merge all policies like health, motor, life insurance etc. in a single account.
Through the circular, the insurance regulator has asked the life insurance companies to tie up with all insurance repositories. Last year, the insurance regulator granted IR licenses to five entities – NSDL Database Management, Central Insurance Repository, SHCIL Projects, Karvy Insurance Repository and CAMS Repository Services.
IRDA has clarified that insurance companies cannot deny any request for electronic policy during the pilot launch. The regulator has also put a cap of Rs. 60 and Rs. 40 for issuing or converting electronic policy to new and existing policyholder respectively. Insurance companies will bear this cost, clarified IRDA.