The insurance world is set for a change from October 1 as the Insurance Regulatory and Development Authority (IRDA) has directed all the companies to provide the option of issuing policies in electronic format. Polices such as motor insurance and travel insurance will be made available only in the electronic format.
The new move towards a paperless form of insurance is expected to bring in major improvement in the industry’s functioning and would require companies to change their ways of operations by being more technology-oriented. It would also help consumers by increasing convenience of transaction and quicker purchase of policies. Since the policies will be issued in de-materialised format, consumers will be required to open a e-insurance account with insurance repositories to give effect to the transactions.
So, will this move result in premium rates to come down in the long run? Insurance experts seem to be divided over the impact of the move on premium rates. They feel that it could be a while before the impact on premiums is seen.
FeMoney brings you view of some leading experts on the issue:
Shivakumar Shankar, Managing Director, LexisNexis Risk Solutions India, feels the impact on premium would be ‘marginal’ at best. “Insurers are allowed to give a discount as approved in IRDAI product filing, on the premium for such e-policies, due to anticipated lower cost of servicing. However, at a broader level, the premium is based on the perception of the risk and this does not change much. Hence, the impact on premium rates is marginal, if at all.
S R Balachandher, Company Secretary and Chief Compliance officer, Royal Sundaram General Insurance Co. Limited says the success of the scheme would determine its impact on premium rates. “Premium rates may not be impacted immediately but depending on how successful the scheme is, there could be a possibility for a reduction in premium as administrative costs come down for companies over a period of time.
Yashish Dahiya, CEO& Co-founder, Policybazaar.com, however, feels that insurance products will become cheaper in the long run due to the change from October 1. “With the launch of e-policies, we expect insurance companies becoming more cost-efficient in their logistics, especially in their distribution network. Insurers are expected to transfer the benefits of this cost-efficiency to their end consumers, thus making the insurance products cheaper over a period of time.”