Digitisation of insurance policies: Scope and future

With each passing year, digital is expanding its footprint in every sector within India and across the globe. Of late, the insurance industry is getting intensely impacted by the penetration of digital. This began in 2005 when people started searching for insurance policies online and also did policy comparisons. A decade after, insurers are selling policies online and that, too, quite successfully.

The Insurance Regulatory and Development Authority (IRDA), which had proposed digitisation of insurance policies in 2013, have now made it mandatory. With this initiative, the insurance industry is now all set to reach a new milestone.

Objectives behind digitisation

If the compound annual growth rate (CAGR) of 25.36 per cent of the online life insurance market in India shown in a report is anything to go by, it implies that digital has become a new market force that is driving the change in expectations of modern-day consumers. Hence, to avoid the sidelines, insurers need to evolve and respond to the shift to digital. In the light of this, IRDA is reshaping the sector and empowering insurance companies to succeed in future through digitisation.

All of us have seen the positive impact of SEBI's initiative regarding dematerialisation of shares and mutual funds over the past two decades. It brought about the ease of stock maintenance to investors who were grappling with the issue. Therefore, in line with the same initiative, the insurance regulatory authority IRDA has taken the essential step. Dematerialisation of policies will be beneficial for all stakeholders, especially for the policyholders, and this move made by IRDA will bring greater efficiency, minimise costs, and harmonise and build more transparency in policy maintenance.

What digitisation offers

With digitisation in place, each policyholder will get a policy document known as the e-insurance policy, which will be the evidence of an insurance contract, but only in an electronic format. Each customers will have to open an e-insurance account, which will be a repository holding the electronic version of his/her life, health and pension policies, and any other policy-related documents. However, users can also maintain policies in a physical format. In such cases, the insurer will have to issue a policy in both formats.

On completion of the demat process, it is assumed that the repositories will help with customer care as opposed to merely storing data, thus performing a proactive role in addressing customer requests. Besides basic services, advanced services can also be offered through the repository on a yearly or per-service basis and these may include generating premium-due calendars, premium and claims history, service request tracking, facilitating online premium payment and so on.

Policyholders can also request their insurance companies to convert their physical documents to e-documents for free. However, to open an e-insurance account, a user should either get in touch with his/her insurance company or any other repository from the Central Insurance Repository Ltd (CIRL), NSDL Database Management Services Ltd (NDML), CAMS Repository Services Ltd, SHCIL Projects Ltd or KARVY Insurance Repository Ltd.

The most significant benefit of digitising your insurance policy is that in case you are planning to get another insurance policy, you won't have to show supporting documents such as KYC. Moreover, all your documents will be safe and stored in one central data repository.

What does the future hold?

Life insurance policies have the lion's share, followed by vehicle protection, health and travel. A report from BCG shows that by the year 2020, digital insurance will grow by 2,000 per cent from its current state, with a total turnover of Rs 15,000 crore. Furthermore, it is also said that in 2-3 years, 75 per cent of insurance purchase decisions will be powered by digital channels. This prediction has been proved by a consumer trend analysis conducted by Google, which showed that since 2008, there has been a growth of 450 per cent in the number of users searching for life and health insurance policies and related information online while the cumulative growth witnessed by the insurance industry is that of 600 per cent over the past five years.

Digitisation is expected to be a long-drawn-out process, which will be rolled out in phases as per regulatory guidelines, but it will definitely be a uniform experience for each and every stakeholder.