Analysis: Will demat account be mandatory for insurance policy holders like stock market? , print exp scsg 91 regarding demat of all insurance policies

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Insurance policies can also now be held in demat accounts like shares of companies listed in the capital market are kept in demat accounts. The Insurance Regulatory and Development Authority of India (IRDAI) is considering a proposal to make demat accounts mandatory for insurance policies.

when does it start?

This facility was first introduced in the year 2013. Accounts were launched for e-insurance from five insurance repositories- CAMS repository, Karvy, SHCIL Projects, NSDL Database Management and Central Insurance Repository of India. With SHCIL surrendering its license, this number has come down to four.

Despite the many benefits for everyone from consumers to insurers, the plan has not been well received by policyholders and insurers due to lack of demand from insurers and additional costs. Now, an insurance policy plan can be approved in an electronic policy i.e. demat account if mandated by the insurance regulator.

What exactly does IRDAI have to offer?

IRDAI is in discussions with industry and insurance experts regarding demonetisation of insurance policies. However, this proposal has not been made mandatory yet. If the consumers get insurance through the e-insurance account, it will benefit all the stakeholders of the system including the regulator.

Dematization of insurance policies is likely to be implemented for all new policies from the month of December (2022) this year. Therefore, the deadline for demonetisation of existing policies could be December 2023.

How exactly does the dematerialization process work?

Simply put, the process involves converting your existing physical insurance policies into electronic form or directly buying these policies in digital form. Like shares of stock market companies are dematerialized.

According to capital markets regulator Securities and Exchange Board of India (SEBI), currently 99.9 per cent share transactions are done through demat accounts. However, digitization of insurance policies has not been so successful so far. Unlike stock market investors, policyholders cannot transact regularly through e-insurance accounts, which is also a major reason for lack of demand.

What is an EIA Account?

Especially after Corona, there was an emphasis on digitization in the field of financial services. A record number of demat accounts were opened during this period. Due to this, electronic insurance policies are likely to be held in a demat account called e-insurance account or EIA in the near future. Currently, policyholders do not have to pay any charges for opening an EIA, as the cost is negligible at Rs 35 to Rs 50 per policy, which is borne by the insurance company on behalf of the customer.

How to open EIA account?

The process of opening this account is very simple. The customer only indicates the choice of the insurance company while purchasing the policy. And that insurance company immediately opens an EIA account on behalf of the customer. This feature is still available, but it is currently voluntary.

A policy buyer can open a new EIA account at the time of purchasing a new policy. So that the new policy can be available through e. In addition, existing physical insurance policies can also be converted into electronic form. Once a decision has been taken to purchase a particular policy, it can be purchased through an EIA. Through the same it will be credited to the demat account electronically.

For policyholders, the process of opening and maintaining an account as well as converting physical policies into demat form is very simple. An I-Trex has already been created by IRDAI, so there will be no duplication of EIA. Once the policyholder has an insurance account, they can add all their policies to it and digitize the policyholders by approaching the insurance companies.

Should insurance go digital?

If the existing physical insurance policy system is working properly as of now, the main reason for policyholders to go for demat is that the policyholder will have no choice if the IRDAI proposal is approved. But even though it is not mandatory, it has many advantages. Policyholders can keep all the insurance policies at one place. From this website, customers can buy an insurance policy and renew it by paying premium. Often insurers send renewal messages on time via email or SMS. But there is no guarantee that every insurance company will do so. Hence, missed installment may result in late payment or policy closure. Also if there is a policy on EIA it is less likely to be lost. Most importantly, if the bank account, address or contact details in the policy are to be updated, then only the account in the EIA needs to be changed. That information will be shared with all relevant insurance companies.

What are the benefits of EIA?

In EIA, all the policies taken by the policyholder from different insurance companies are kept at one place. This ensures that the family members get all the benefits in the absence or death of the policyholder. There are many instances where family members are often not aware of all the policies and risk cover benefits are not available after the death of the insured. Each e-insurance account facilitates the appointment of a successor. This helps the family members to get the policy benefits in the absence of the policy holder.

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