Post the successful transition of shares and mutual funds to the electronic format, it is now time to turn attention to the other important instrument of financial markets — life insurance. Insurance regulator Irdai (Insurance Regulatory and Development Authority), after giving it careful thought, is expected to give nod to the dematerialisation proposal.
To be sure, dematerialisation of insurance policy documents offers substantial benefits to all stakeholders. Policyholders are of course the biggest beneficiaries, as they are not required to physically preserve policy documents. Apart from the assurance that their policy documents are in electronic format, policyholders also avail of single reference points for all their life insurance purchases. This is on the lines of the consolidated mutual fund statement that displays investment details across mutual funds. This takes a load off the policyholder who invests a great deal of time and effort in tracking various policies, especially at the time of paying the premium. Equally relieved will be the family members who do not have to run from pillar to post to seek policy details in case of an emergency.
The other convenience for the policyholder is focused customer care. Once the demat process is completed, it is envisaged that the insurance repositories will assume the role of customer care, as opposed to being mere suppliers of electronic data, thereby performing a more active role in servicing requests.
Demat of insurance documents will also alleviate logistics issues related to delivering the policy, especially to customers in far flung locations as also to those who are travelling, as the policy gets credited to the customer’s electronic insurance account much like a passbook entry.
Evidently, digitisation of insurance policies will bring to the fore the benefits that other financial segments have availed of post-digitisation, like stock markets. So policyholders can expect efficiency and transparency in services, all ingredients of a richer customer experience. For the suppliers, i.e. insurers, digitisation will streamline operations and endear them to customers. It will also allow for superior underwriting as data is captured more efficiently. Moreover, customers can expect better quality products as insurers mine data for course correction.
Digitisation will also help Irdai to identify industry trends easily and quickly, based on digitised data available with insurers. This in turn will help the regulator usher in reforms and best practices and eschew malpractices by enhancing its supervisory role. Of course, digitisation is expected to be a protracted process with phased rollout dictated by infrastructure and regulatory guidelines. Post-digitisation, benefits will accrue to policyholders who have opted for the dematerialisation format.
Customers who continue to hold policies in paper format will keep receiving support in the traditional manner, again on the lines of the stock market experience where demat benefits are only visible to owners of demat shares. Of course, to an extent this has been resolved by regulators by making demat of new shares compulsory, ensuring a uniform experience.
On the insurance side, policyholders will have the option to continue with policies in the existing format or opt for the electronic system. Customers can also revert to the physical format after having chosen the electronic format. So there is considerable flexibility in the demat proposal for the life insurance industry.
Demat also brings good news for agents as they will be supported by the insurance repositories in servicing client requests. As repositories share the customer service function, agents will find more time on client advisory and acquisition. In a way digitisation will lead to specialisation with units performing what they are best qualified to do.
(The writer is the deputy CEO of Birla Sun Life Insurance)
