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Dematerialization of Insurance Policies

/ August 19, 2019

What is Dematerialization?

The process of converting a physical certificate or document into an electronic book is called Dematerialization. In the era of Digital, it is imperative that securities are no longer in a physical mode, but are registered and transferred electronically.

Dematerialization of Insurance policies

On September 16, 2013, the then Finance Minister- P Chidambaram, launched the IRDAIs - Insurance Repository System (IRS). This system was aimed to insure green initiatives, transparency in all insurance-related work and lower management cost for the insurers. It was also aimed to bring down the total operational cost by eliminating the need for printing and dispatching documents, and sending the documents to receiver’s repository account electronically.

The IRS system allots a unique ID to every individual, and all the insurance policies of that individual, life as well as non-life, come under the unique ID. IRS maintains all policy-holder data, such as history of claim, names of the beneficiaries, assignees and nominees.

Benefits of Insurance Dematerialization

This concept may be new to some, and may not be utilized widely. However, Dematerialization of Insurance Policies through IRS has several benefits. To list a few,

  1. It brings down the cost of the insurance plans and reduces the time and effort overheads of implementing the policies.
  2. An Insurance investor can choose any of the five Repositories licensed by IRDAI, to open or maintain their account.
  3. The Know Your Customer (KYC) documents need to be submitted only once, that is, at the time of opening the Insurance Demat account. A unique ID is created, which can be referred to at the time of purchasing new policies.
  4. Policyholder can directly change address or nominee details through the Insurance Demat account.
  5. Maintenance and safekeeping becomes easier as compared to physical documents.
*The repository account is free of cost to the policyholder.
Disadvantages of Insurance Dematerialization
  1. Policyholders cannot trade their policies through the Demat account as it is not an operative account.
  2. The repository account may have fewer policies to maintain when compared to a regular Stock Demat account.
Process for Opening an Insurance Demat account

An insurance policyholder can follow these steps to open an insurance Dmat account:

  1. Download e-insurance account form.
  2. Send the filled in e-insurance application form to respective Insurer.
  3. The Insurance Repository will generate the e-account number and send to the respective Insurer.
  4. Insurer will send the allotment number to the policyholder and will update the policy number on the policyholder’s account.
  5. Finally, the policyholder will receive a notification about the successful upload of the policy on the e-portal.

The Repository system is still in the formative stage. Initially, IRDAI had given the license to only five companies to form an IRS system. These companies were NSDL, CIRL, SHCIL projects Ltd., CAMS Repository Services Ltd. and Karvy Insurance Repository Ltd. As of now, not all insurance companies have opened their accounts with all repositories. However, the Government is closely monitoring the system and trying to make the dematerialization system efficient and affordable for policyholders.

Sreechandana G

Sree Chandana is the Academic counsellor and senior trainer for Insurance with NIIT IFBI.
A versatile trainer who excels in Insurance, Customer Service and Soft skills trainings. A certified International Trainer & Assessment Coach (ITAC) from NSDC and Australian Skill Development, Chandana has done her PG in Literature and Psychology. She also holds certificates in Licentiate, NISM MF, NSDL Demat and Equity & Derivatives. Additionally, she acquired graduation degree in Life Underwriter Trainer Council Fellowship (LUTCF) from American college.