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Is insurance demat worth it?

Anand Kalyanaraman | Updated on January 07, 2014 Published on January 07, 2014

Holding insurance policies electronically has positives, but be geared for some glitches.

Do you have trouble keeping track of your insurance policies? You are not alone. Many of us tend to let due dates for premium payment swish by in a whirl of forgetfulness, or have to jog our memories to recall where we kept our policy documents ‘safely’. Then, there are those who forget to share with their dependents, critical information about policies bought for their benefit.

All these can result in hassle at a time of need, defeating the purpose of holding an insurance policy. In any case, with a lot of people taking multiple covers from different insurers, policy management can become quite a task, even for those punctual with payments and diligent with paperwork.

However, solution to this problem is just a click away. You can now convert your physical insurance policies into electronic form (i.e. dematerialise) and access them all in a single place.

Read also: The hiccups with e-insurance

Electronic Insurance account

For this, you need to open an electronic insurance account (eIA) with one of the five entities permitted by the Insurance Regulatory and Development Authority to act as insurance repositories. These are NSDL Database Management, Central Insurance Repository, SHCIL Projects, Karvy Insurance Repository and CAMS Repository Services.

A policyholder is allowed only one eIA. To open an eIA, you can apply directly to the insurance depository, its approved agents or through your insurance company.

The KYC (know-your-customer) procedure is simple and quick; within seven days of application, the account will be opened and you get a login and password for online access. You can then demat your existing paper policies by submitting service requests either to the insurance repository, its agents or to the insurer. Also, you can buy new policies in electronic form, simply by quoting your unique eIA number to the insurer.

The best part is that opening and operating an eIA is free of charge for policyholders. The insurance companies, which are expected to save on costs from the shift to electronic policies, will pay the insurance repositories. In fact, it is expected that once dematerialisation gains pace, insurance companies may pass on the cost benefits to policyholders; this could mean cheaper insurance policies in the future.

Going demat with your insurance polices has many plusses. First, electronic polices do not run the risk of loss or damage, unlike their physical cousins. Then, there is the convenience factor. You can easily access all your policies with a single login and also make premium payments online from the eIA.

Benefits

This can save time and reduce the chances of missing a premium payment date. Importantly, having it all in one place provides a complete view of what you hold — this can help not just you but also the policy beneficiaries when the need arises. Also, payout to registered bank accounts through the electronic mode means speedier settlements.

The eIA contains details of the policies you link to the account, and allows downloading policy copies. Besides, it offers a single point of service.

So, rather than making the rounds of many insurance offices, you can submit just one service request to effect common changes, such as updating your address, contact number or bank account details. Also, with the KYC process done away with for the purchase of new policies in the electronic form, there will be lesser paperwork.

The eIA has safeguards and offer a fair degree of flexibility. You have to appoint an authorised representative who can access the eIA in case of your death or inability to operate the account.

This person will act only as a facilitator; he is not entitled to policy benefits unless designated as nominee or assignee by the policy holder. You can change your authorised representative, and also appoint the same person as both policy nominee and authorised representative. You can also change your insurance repository.

There is no compulsion on insurance policyholders to open an eIA. You are free to keep policies in physical form. Also, you have the choice to link only some policies to the eIA while keeping others in the physical form. Besides, even policies which have been linked can be de-linked later by submitting a service request.

anand.k@thehindu.co.in

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