The Insurance Regulatory and Development Authority (IRDA) has laid down the guidelines to create insurance stores and for the initiation of e-insurance policies. The IRDA itself will be licensing these repositories and they will also stay connected to the insurance companies in the form of a service provider.
How will e-insurance work and benefit others?
The media has already written that the insurance policyholders will, in a short time, be able to start their e-insurance or demat accounts. These policies will be opened electronically and also lessen the problems for the buyers.
Now the customers need not provide address and age proof every single time they buy a policy. The insurers will also have the benefit of not having to deliver and print policies time and again. The insurance depository will provide one of its kind account numbers to the individual policyholders.
This facility will be applicable for every form of insurance including life, motor, health, and group insurance policies. No matter, how many insurance policies one has the insurance repository will maintain information that includes claims history of every policyholder – it will also have other data such as:
- names of beneficiaries
- names of nominees
- names of assignees
Sandeep Bakhshi, the MD of ICICI Prudential Life Insurance, has hailed the decision. He has stated that this will make customer service better from the point of view of efficiency. He has also expressed optimism that the customers will have more convenience once this system comes into play fully. The insurers will also be able to save a lot of money.
A major advantage of the repository system is that all the policies taken in a single account will be consolidated. In an emergency situation, this will assist the family in knowing which policies were bought by one of the members and determining if they can be helpful in that case.
In case of e-insurance policies the payment will be done through the web but the paperwork might have to be done offline in some kinds of policies. In case of the term insurance policies financial documents like earlier income tax returns, and medical test results have to be provided.
How will e-insurance help the insurance industry?
This form of insurance is also supposed to help the internet insurance or web assurance market in the country. The infrastructure, which will come with the web based insurance programs, will enable insurers to easily check the authenticity of the policyholders and also verify them.
The insurers can also find out if the policyholders are viable from a financial point of view. The customers, on their part, will now find it easier to buy the policies in shorter time and with more ease.
The Chief Marketing Officer of policybazaar.com, Akshay Mehrotra, has stated that e-insurance policies will reduce the distribution expenses and help the consumers buy policies themselves. This will also reduce the income of the distributors.
Girish Batra, the managing director and chairman of NetAmbit, has estimated that if the insurers earn majority of their money through the web, they will be able to bring down the infrastructure related expenses.
An important benefit of the online insurance programs is that the buyers can get the feedback regarding individual insurance products from other customers who have availed them and thus decide if they wish to buy it or not. This is a unique feature as well.
The online insurance programs also provide more cover than the offline plans – the major reason behind this is the belief of the insurers that people who are buying online insurance plans enjoy better economic status and can also avail improved healthcare benefits.
A major difference between the two forms of insurance is that in case of the online version the upper limit for age is more than the conventional plans. Batra has also stated that the possibilities of an online buyer being asked to appear for a health check are far less in case of the e-policies.
Challenges for e-insurance industry in India
One major debate regarding the possibilities of the e-insurance industry of India is whether the infrastructure is good enough. At present the number of internet users in India is rather restricted. Sujata Dutta, associated with the DLF Pramerica Life Insurance, has stated that the success of this type of insurance will be related to the nature of internet usage in India and how much accustomed to it the people are.
She has stated that at present, this service can only be availed by the section of insurance policyholders who use the internet regularly for various procedures. Experts have also stated that if e-insurance has to work properly in sectors such as automobile insurance, the insurers should have previous information like details of vehicle registration and all the data regarding earlier policies.
In these insurance programs, there can be delays if the insurers have changed. The insurance provider can also find it hard to process an online application if information on areas like LPG or CNG fitting and vehicle model is not provided on the website.
There are several operational and legal issues that will have to be sorted out as well. Some of them may be mentioned as below:
- Customer privacy
- Requirement for digital signatures which are fail-safe
- Sharing databases of customers
Authentication of digital signatures is expected to be the most important issue among the above mentioned ones. Experts are of the opinion that the main reason behind this is the fact that the digital signatures will allow insurers to make sure the right customers are doing the online transactions like purchasing the policy or changing some facts or details in their policy papers.
Problems with e-insurance policies and how to deal with them
The major issue with the web based insurance policies is that they are pre determined and cannot be customized to match the requirements of the consumers. Even, the premium is fixed. In addition, in case of most of the special e-insurance policies the policyholders will be unable to opt for benefits like the following:
- accidental disability benefit
- important illness covers
- key premium waiver covers
If policyholders want to incorporate these, they will need to make extra payments. In case of customers, who are financially aware, the absence of an agent is not a problem when it comes to filling up the application. In case the consumer has doubts about what he or she wishes to buy, it could prove to be a major hindrance.
The VP of Insurance Foundation of India, SK Sethi has stated that the e-insurance service providers are yet to come up with a commendable web based mechanism for protecting claims – so, the policyholders might have to contact their agents or the insurers in such cases.
Experts have also stated that the buyers should make sure that the customer feedback is latest in case of sites that operate as insurance aggregators. It is advisable to visit the homepage of the company and verify the facts.
The consumers should also check the security certificate (SSL) of a website to make sure it is authentic and can guarantee safe encoding of files. It is better to take screenshots of each e-transaction of completed payment. This will make sure that the policyholders have some evidence that they are making the payments.
Which companies are providing e-insurance programs?
ICICI Prudential is one of the companies that will offer e-insurance products and services in India. Several life insurance providers like Aegon Religare, Metlife, and Kotak Life will also be providing e-insurance policies.
There are several websites that offer total information on general and life insurance products:
Interested consumers can get in touch with these websites to avail the products of the top insurers and also do a comparison of different products in individual segments. This will help them get some idea about what choices they have and thus make informed decisions.
IRDA guidelines for e-insurance policies
The IRDA has stated that the main aim to initiate the insurance repository is to help the policyholders revise, modify, or change their plans in a correct and quick manner. According to the guidelines, the providers of e-insurance policies will need to avail the services of authentic repositories and the e-policies will also be regarded as legitimate contracts.
For an insurance repository to be regarded as certified, it should have a minimum net worth of INR 25 crores sans any investment from outside India. Also no single insurance company should own more than 10 percent of its stakes or enjoy a managerial position in an insurance repository.
The IRDA has also made it mandatory for the insurance repositories to take steps that will make sure that all crucial information will be adequately safeguarded and there will be effective systems that will prevent any misappropriation of deals and records. The guidelines also state that insurers can make deals with more than one insurance repository to make sure that e-insurance policies are properly maintained.
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Last Updated on 5/11/2012