Paperless insurance is here, say bye-bye to paper policies

The new initiative is expected to digitise 1,800 million pages annually and save more than Rs 100 crore for the industry.

Say bye-bye to paper documents for an insurance policy. Life Insurance Corporation of India (LIC) has tied up with all the five insurance repositories to offer policies in the digitised format, paving the way for paperless insurance. More insurers are likely to follow suit and go for tieup to offer paperless policies.

Insurance behemoth LIC has launched a two-month pilot project in Mumbai to digitise policies. "Would like to clarify that discussions with repositories have been held for the limited purpose of a pilot launch as per guidelines issued by regulator Insurance Regulatory and Development Authority (Irda) following the June 10, 2014 circular," LIC said in a statement.

The company clarified that the agreement is only for a two-month pilot project and no final decision has been taken in this matter or no agreement has been signed.

While LIC will be offering the services to existing customers, for new customers, the service will be first offered in the Mumbai division and later be extended to other regions. LIC is expected to digitise at least 5,000 policies in the next 10 days.

Irda has asked all life insurers and insurance repositories to participate in the paperless project in order to increase the pace of insurance digitisation. The pilot project will be for two months with effect from July 1.

During the pilot launch, each life insurer have to convert a minimum of 1,000 or five per cent of the existing individual policies into electronic form.

Insurance repository is a facility to help policy holders buy and keep insurance policies in the electronic form, rather than as a paper document. At present, five companies have been registered as insurance repositories to offer this service, which include NSDL Database Management, Central Insurance Repository, CAMS Repository Services, SHCIL Projects and Karvy Insurance Repository.

While Irda has only allowed life insurance policies to be digitised first, non-life policies like health and motor insurance will also be allowed to be digitised in due course.

The insurance regulator expects all insurance policies in digital format in five years. While this has not been formally announced, it is expected that policies with annual premiums of above Rs 25,000 could be mandated to be stored digitally from the next financial year onwards.

The life insurance sector issued 3.81 million policies between April 1, and June 30.

CAMS Repository Service (CAMSRep) CEO SV Ramanan said with LIC coming on board, the process of converting physical policies into demat format would become faster. Ramanan said till now, the repositories have opened 150,000 e-insurance accounts of which CAMSRep has 85,000 accounts. He added there have been 20,000 policy credits or requests for conversions among other service requests.

A senior official with another insurance repository said private life insurers were in a wait-and-watch mode. While we understand that customers have not begun contacting insurers since there is low awareness about the new system, insurers were waiting for large companies to tie up.

Irda has said during the pilot launch, an insurer will not deny any request for electronic policy from any policyholders.

Industry officials said that while almost all life insurers have tied up with repositories, issuance of policies in an electronic format has been slow. Policyholders have not begun receiving intimation from insurers giving them the facility to convert their policies.

For the policies converted or issued in electronic form, within an e-Insurance account, the insurance repository would be responsible for providing mandatory information such as policy status (including premium status, net asset value status, bonus status, loan status, claims status, nominee/assignment status, etc), premium due calendar and online premium payment facilitation, premium history and annual statements.

At present, there are more than 330 million life insurance policies and 90 million general insurance policies in India. On an average, IrdaÆs estimates suggest that Rs 150-200 per customer is spent by an insurance company annually in maintaining policies in the physical form. The new initiative is expected to digitise 1,800 million pages annually and save more than Rs 100 crore for the industry.