Insurance providers might have to offer life insurance policies in the demat form, with the Insurance Regulatory and Development Authority of India (IRDAI) keen on implementing this. According to sources, insurance companies will be asked to provide policies in demat form if the premium exceeds a certain threshold limit. There is no decision on the threshold limit yet.
The move, aimed at reducing costs and simplifying the process of owning a life insurance policy might be hard to implement, with insurers not ready for it.
India has over 360 million policyholders currently, with this number expected to go up by 12-15 per cent per year till 2022, according to a report by Brand Equity Foundation.
The rule, if implemented, will cover both new and existing customers. IRDAI first attempted this move in 2013, licensing five companies to establish insurance repositories. Demat formats enable individuals to have a paperless, single-view policy.
Current IRDAI norms make it mandatory for insurance companies to provide insurance in an electronic manner. The two options under this entail the use of an insurance repository which uses demat form to maintain records, or via email, wherein companies send an email of the policy to customers.
Companies have been wary about the demat form owing to security concerns. Lack of internet penetration and knowledge about demat is another issue plaguing companies.
With digitisation catching on fast in the country, IRDAI will hope that insurance providers step up their game to popularise policies in demat form.