Indians will see the next most advanced technological update in the form of the Dematerialisation of insurance policies. In yet another unprecedented move, The Insurance Regulatory and Development Authority of India (IRDAI) has proposed to mandate the dematerialisation of NEW insurance policies by the end of the calendar year 2022.
The IRDAI has also proposed setting up a new platform for the sale, servicing, and claims of insurance policies, which will be operational in December 2022.
To make the Dematerialisation of insurance policies transition smoother, the IRDAI has also made eKYC mandatory for all insurance policies from November 1, 2022. With mandatory eKYC, the insurance regulator is aiming to speed up the process to abide by the deadline which is the end of the calendar year 2022.
Every policyholder needs to open an Electronic Insurance Account (eIA) to store insurance policies in dematerialised form. And all insurance policies including Life Insurance and General Insurance can be stored in eIA.
Currently, there are four insurance repositories where a person can open an Electronic Insurance Account (eIA) – NSDL National Insurance Repository, CDSL Insurance Repository Ltd, Karvy Insurance Repository Ltd, and CAMS Insurance Repository Services Ltd.
What is Dematerialisation of insurance policies?
The process of converting physical insurance policies to electronic records in an Electronic Insurance Account (eIA) with insurance repositories.
Who are the depositories where you can open an Electronic Insurance Account (eIA)
Currently, there are four insurance repositories where a person can open an Electronic Insurance Account (eIA) – NSDL National Insurance Repository, CDSL Insurance Repository Ltd, Karvy Insurance Repository Ltd, and CAMS Insurance Repository Services Ltd.
Can you hold dematerialised Insurance policies in the same account as the Shares DEMAT Account?
No. The depositors for holding dematerialised insurance policies are different than depositors holding shares and mutual funds in Shares DEMAT Account.
How many Electronic Insurance Account (eIA) can you open?
Unlike Shares DEMAT accounts, every person can open ONE Electronic Insurance Account (eIA). All policies will be stored in only one Electronic Insurance Account (eIA).
When does the Dematerialisation of insurance policies need to be done?
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed to mandate the dematerialisation of NEW insurance policies by the end of the calendar year 2022.
The IRDAI has mandated insurance companies to dematerialize existing policies by December 2023.
When existing insurance policies will be dematerialised?
The IRDAI has mandated insurance companies to dematerialize existing policies by December 2023.
Which Insurance policies need to be dematerialised?
Each and every insurance policy will be dematerialised. The indicative list is Life Insurance, Health Insurance, Personal Accident Insurance, Vehicle Insurance, Group Insurance, Travel Insurance, Marine Insurance, Fire Insurance, Professional Indemnity Insurance, Liability Insurance, Credit Insurance, etc.
Will Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) will be dematerialised?
It’s not yet clear whether Ayushman Bharat cards will be dematerialised or not. But as IRDAI is also regulating Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), it may be dematerialised in near future.
Will Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) will be dematerialised?
Its not yet clear whether Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) will be dematerialised or not. But as IRDAI is also regulating Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), it may be dematerialised in near future.
Do group insurance policies also need to be dematerialised?
Yes, Group Insurance Policies also need to be dematerialised.
Who needs to open an Electronic Insurance Account (eIA) to hold dematerialised insurance policies?
Every Individual and Every Entity like Partnership Firms, LLP, Private Limited companies, Public Companies, Trust, Cooperative Societies, etc holding an insurance policy right now or buying a new one after 1st January 2023 needs to open an Electronic Insurance Account (eIA).
What are the advantages of Dematerialisation of insurance policies?
- First and foremost your advantage is access to all your policies in one place digitally. Also in your absence, your family can take the benefits of the insurance policies you bought with easy access. To give a perspective, just LIC is sitting with INR 21,336 crore unclaimed money as of December 2021.
- You can easily manage your policies like renewal and file claims electronically.
What are the disadvantages of Dematerialisation of insurance policies?
- With the introduction of a new stakeholder i.e. Depository in Insurance Policy transactions, there is obviously an increase in the cost of insurance policies due to the depository fee to facilitate insurance policy transactions. That is the reason why Depositories are at advantage in increasing their revenue after the Dematerialisation of insurance policies.
The timeline is not yet finalized by the regulator but the Dematerialisation of Insurance policies is definitely a welcome move for insurance buyers. India is way ahead in financial technological facilities like:
- National Payments Corporation of India (NPCI) – a specialized division of RBI
- Unified Payment Interface (UPI)
- Immediate Payment Service (IMPS)
- Cheque Truncation System (CTS)
- RuPay (Rupee Payment) Cards
- FASTag
- BharatQR
- Bharat Interface for Money (BHIM)
- Centralised Positive Pay System (CPPS)
- Reserve Bank of India (RBI)
- National Electronic Fund Transfer (NEFT )
- Real-time Gross Settlement (RTGS)
- Securities Exchange Board of India (SEBI)
- Dematerialisation of shares and mutual funds
- Future areas for Technology upgradation
- Loans
- Land and Properties records with Blockchain Technology
- Gold
- Vehicles
Also, do read my other blog articles on various topics at https://www.smartcafirms.com/ca-firms-blog/.
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