India:Insurance repositories slow to gain in popularity

Insurance repositories have failed to take off in a big way in the country, with insurance regulations not mandating insurers to issue policies only in electronic form.

Although official data is still not available, it is believed that less than 2% of the entire industry's 30 million plus policies have been digitised, reports Moneycontrol.

A repository aims to enable customers to have paperless insurance policies. A repository account holds all insurance policies of a customer in a digitised form regardless of the different insurers from which the policies are obtained. 

Started as a pilot project by the IRDAI in 2014 wherein life insurers were asked to convert at least 1,000 of their existing individual policies into electronic form, the takeup has been muted.

The country's largest insurer, Life Insurance Corporation of India (LIC), has also not joined this system and has its own internal e-services portal.

Insurers are bearing the cost for digitising the policies.

"Repositories charge about INR30 (46 US cents) to INR40 for digitising a policy over and above the annual maintenance charges. This goes out of our pockets as the service is free for customers," said a senior insurance official.

Further, fearing non-payment of claims, policyholders too have sought to have both physical and digital policies. The head of operations at a mid-size private insurer said that it does not make business sense to have both physical and digital policies since it means insurers incurring double the costs.

According to regulatory estimates, digital policies would have enabled insurers to save huge costs compared to maintaining hard copy policies. About INR150-200 per policy is spent by insurance companies annually in maintaining policies in hard copy. If all the policies are digitised, they could help the industry save about INR1 billion a year.

The objective of creating an insurance repository was to provide policyholders the facility to keep insurance policies in electronic form and to undertake changes, modifications and revisions in the insurance policy with speed and accuracy. Here, the idea was to provide basic services free of cost and other policy-serving related ones at a premium.

When an insurer issues and maintains ‘e-insurance policies’, it has to mandatorily do so by utilising the services of an insurance repository. In segments like motor insurance, the IRDAI has said that all policies have to be issued in electronic format. For other policies, insurers have been asked to give an option to individuals in the proposal form to have a policy in the digital format.