Analysis: Will demat account be mandatory for insurance policy holders like stock market? | All about demat of insurance policies print exp scsg 91

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Insurance policies can now also be kept in demat accounts just like shares of listed companies 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 started in the year 2013. In which accounts were launched for e-insurance from five insurance repositories – CAMS Repository, Karvi, SHCIL Projects, NSDL Database Management and Central Insurance Repository of India. With SHCIL surrendering its licence, the number has come down to four.

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

What exactly is the proposal to IRDAI?

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

Dematisation of insurance policies is likely to be implemented for all new policies from the month of December (2022) this year. So the deadline for demonetisation of existing policies may be December 2023.

How exactly does the dematerialization process work?

Simply put, this process involves converting your existing physical insurance policies into electronic form or purchasing these policies directly in digital form. Just like shares of stock market companies are dematerialized.

According to capital market regulator Securities and Exchange Board of India (SEBI), currently 99.9 percent of share transactions are done through demat accounts. However, the digitization of insurance policies has not achieved such success 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, emphasis was placed 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-Vima Account or EIA in the near future. Currently, policyholders do not have to pay any fee 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 an EIA account?

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

A policy buyer can open a new EIA account while purchasing a new policy. So that the new policy will be available through e. Moreover, existing physical insurance policies can also be converted into electronic form. Once a decision is made to purchase a particular policy, it can be purchased through EIA. Through the same, it will be deposited electronically in the Demat account.

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 a policyholder has an insurance account, they can add all their policies to it and digitize the policyholders by contacting insurance companies.

Should insurance go digital?

If the existing physical insurance policy system is working properly so far, the main reason why policyholders should 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 insurance policies at one place. From this website customers can purchase insurance policy and renew it by paying premium. Often insurers send timely renewal messages via email or SMS. But there is no guarantee that every insurance company will do so. Therefore, late payment or policy closure may result if the installment is missed. Also if there is a policy on EIA there is less chance of it getting lost. Most importantly, if bank account, address or contact details are to be updated in the policies, only the account in 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 in 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 protection benefits are not available after the death of the insured. Every e-insurance account offers the facility of appointing a successor. This helps the family members to get the policy benefits in the absence of the policy holder.

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