Soon insurance policies shall be available online through demat accounts. This is likely to revolutionise the entire insurance industry. A 12-member committee of the Life Insurance Council constituted to look into this issue is expected to submit its recommendations to IRDA next month, according to S.B. Mathur, the council’s secretary general.
A number of customers buy insurance without knowing enough about the commissions paid and terms of risk cover, leading to mis-selling, a phenomenon that has led to an unnaturally high rate of lapsed policies. One of the key benefits of a demat form for insurance will be the ready disclosure of all policy-related information, including commissions and fees paid to the company, exact benefits offered, premium payment and renewal-related dates, and terms and conditions of risks covered. The acceptance of these recommendations by IRDA would serve as a great service to the large number of policy holders, and would make the cost of an insurance policy attractive. This will also help the insurance industry tap the latent demand for insurance by the price conscious customers who are deterred from taking out a policy due to the lack of transparency surrounding the insurance policies sold, or rather mis-sold by the insurance agents/ advisers.
The other notable advantages of the insurance in demat form are:
- Implementation of Know Your Customer (KYC) and Anti- money laundering guidelines would become easy and transparent
- The administrative cost for insurance companies shall be cut down drastically
- Customers shall have the advantage of single point transaction for insurance
- Helping further expansion of the insurance industry.
Hopefully the procedural changes shall be in place for the new system within one month. The first quarter of next calender year should see this welcome transition, which is a big step forward by IRDA, after the abolition of entry load on Mutual fund schemes implemented by SEBI last year.
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