In September 2013, Insurance Regulatory and Development Authority of India (Irdai) had launched the insurance repository system as a pioneering act even at a global level. Before the launch rules were notified and five entities were given licence to act as insurance repositories. It was expected that the insurers would be comfortable to issue policies in electronic form and customers can maintain the records of multiple policies in their e-insurance account.
The insurance repository was expected to function exactly on the line of stock depositories regulated by Securities and Exchange Board of India (Sebi).
The insurance repository (IR) is a facility to hold policies in demat mode just as shares and bonds are held in electronic form by the authorised depositories. The policyholder can open an e-insurance account with any of the registered depositories by furnishing his policy number and the name of the issuing company. The company would then create an e-insurance account with a unique ID number. The IR would then obtain data from the insurer to complete the records. Under the guidelines of the regulator, the insurers are required to furnish data to the IRs.
In case of new policies, if the proposer opts for a policy in demat form then after issue of policy on acceptance of risk, the insurer straight way passes the data to the IR. The beauty of this arrangement is that policies issued by any company on the same life can be maintained in one account. Consolidation of records at one place in a highly tamper-proof mode gives the customer several advantages. He does not have to bother for safe custody of a policy bond for producing at the time of death or maturity claim.
Sometimes the bonds are lost in a natural calamity like flood and earthquake or even destroyed by moths. IR provides the facility to track all policies of an insured life at one place. It makes easier for the nominees to know the total insurance on the life of a deceased person. This arrangement also reduces paper work drastically. In case of change of address the policyholder is normally required to write to insurers for each policies separately. But in this case one intimation to the IR would lead to instant updation of address or even change of nomination in respect of all policies. Interestingly the regulation provides for no payment by policyholders to the IRs.
In order to give a boost to the IR system the insurance regulator revised the guidelines in May and came out with more enabling provisions. The guidelines define basic services, which include intimating the account holder about the status of the policy without any cost. An indicative list has also been issued for premier services which IRs can offer at some reasonable fee if the account holders desire.
The latest guidelines, though intended to facilitate adoption of the demat culture by the insurance sector, have introduced some contradictions, may be unintentional, and this may retard the rate of transition to the paperless ecosystem in the insurance industry. While the choice of selecting IR is left with the policyholders, the insurers have been allowed to tie up with one or more IRs. In such a case, a policyholder may have to open more than one eIA if his subsequent policy is issued by an insurer who does not have agreement with his earlier IR.
This needs to be reverted to the earlier position wherein insurers were asked to enter into an agreement with all the licensed IRs. On the other hand, even though the Insurance Act 2015 provides for mandatory guidelines by the Irdai for issue of policies in e-form for certain categories now and for all, eventually the latest guideline has skipped issuing any such instruction.
However, the insurance community must take concerted steps to successfully meet the challenge of heightened service demands, increasing service cost and vulnerability to frauds, etc by embracing the insurance repositories as business partners. Most of them have proven experience of serving the financial market and are backed up by robust IT infrastructure. This will be a significant move to fulfil the government’s vision of providing citizens with a single view of all their financial assets.
The write is former MD & CEO, SUD Life and partner, Intuit Consulting
