Insurance policies must be fully digitised: Chidambaram

Union finance minister P Chidambaram has urged that it should be made mandatory on insurance companies to digitalise all policies. He asked the Insurance Regulatory & Development Authority (IRDA) to announce a timetable to make digitisation mandatory for both life and non-life policies.

Inaugurating the insurance repositories scheme launched by IRDA at a function in New Delhi yestrday, Chidambaram said the repository system will help policy holders keep insurance policies in electronic form and simplify making modifications and revisions.

The IRDA has selected five companies to conduct repository services - Database Management Ltd, Central Insurance Repository Ltd, SHCIL Projects Ltd, CAMS Repository Services Ltd, and Karvy Insurance Repository Ltd.

Currently however digitisation is only available for life insurance policies, and participation is voluntary.

Under the system, a policy holder can open an e-insurance account with an insurance repository to buy and keep policies issues by various insurers in electronic storage. Opening such accounts is free.

"It is a novel idea but should have been implemented long time ago. It is a modest beginning with life insurance policies," Chidambaram said, and asked IRDA and depositories to quickly extend the service to non-life policies.

The finance minister stressed the need to have more competition in offering the service to bring down the cost. He said the initial cost of Rs150 per person per year was very high and could be brought down to Rs20.

Chidambaram also underlined the need for digitisation of all policies as policy holders were losing their documents in natural calamities or due to migration from rural to urban areas.

He said the system will not only give peace of mind to policy holder by eliminating the risk of loss of documents or manipulation or forgery by somebody but will also help insurance companies to settle claims in the absence of papers.

According to IRDA, the new system will make it a economical preposition for insurance companies to issue and service e-policies as compared to traditional paper policies.

A policy holder can also convert existing policies (in paper form) into electronic form by submitting a request for conversion after opening an e-insurance account.

Once a person has an e-insurance account, he doesn't have to go through the KYC process every time he buys a new policy.

The repository will issue a unique code number to all policy holders, and policies of those people will come under that number.

It maintains the history of policy details such as claims, nominees, beneficiaries and other data.

The IRDA gave five companies the status of insurance repositories and provided them with a license valid till 31 July 2014.

The insurers can enter into agreements with one or more repositories.