After the news that the IRDAI plans to dematerialise life insurance policies on
the same lines as demat of shares held by equity investors, there has been considerable
cheer from all sides of the fence, as this decision promises to be a win-win situation
for all the players involved.
The Idea behind Dematerialisation
Dematerialisation means converting your physical policy document into a modifiable
online object. No longer will you need to scramble to search for paperwork when
the time to renew your policy approaches.
The manner in which demat of policies issued by life insurance companies in India
is to be implemented is that a policy holder has to open an electronic insurance
account (EIA) with any one of five insurance repositories authorised by the IRDA.
Each person is allowed one EIA and this can be directly opened with the repository
or through the insuring firm's agents.
By taking care of the maintenance and security functions of policy documents and
details, the repository will step out of its routine function of storing data and
step into customer service and reduce the workload of the insurance firm.
Online processes further ease costs on logistics incurred to reach out to customers
in far flung and remote locations. Apart from portability, mobile customers will
also be able access and process policy related issues through smart handsets.
How you Benefit
Efficient and transparent services will be a logical consequence of this change
and transform into a happier customer experience. Life insurance companies in India
can now focus on presentation and marketing instead of routine query processing.
Customer details can be more easily linked with credit, tax and other databases,
which will allow better estimation of risk and personalization of products.
Beneficiaries and family members of the policy holder will benefit from the availability
of the electronic document in an accessible location, where all the details and
benefits can be easily checked against claims by the insurer's processing agents,
without putting anyone in too much trouble.
Life Insurance Companies in India also Benefit
The industry watchdog can also benefit by easier access to industry trends and play
its part as a supervisor better by promoting best practices and punishing unfair
Customers will still have the option to retain their paper policy document but will
then not be able to access benefits that are enjoyed by electronic policy holders.
Customers can inter convert between physical and electronic formats and will continue
to find support for their choice.
Life insurance companies in India will find it easier to divert productive resources
to more profitable activities, such as financial advising and conversion of new
In short, each player in the system will find himself or herself enabled to engage
in the function that best concerns him or her, and save wastage and replication