Investors have been dealing with dematerialized shares of companies and mutual funds for quite some time now. The experience has been wonderful. They do not have to maintain shares or mutual funds in physical forms which are traded very often and are quite a cumbersome process to do in physical form.
Considering the success of shares and mutual funds in dematerialized, insurance regulatory development authority (IRDA) has come up with the initiative to manage insurance in dematerialized form. This will help insured maintain insurance details in demat form with any insurance repository (IR). This means they wont have to go through the hassle of maintaining multiple documents for a number of years. Currently, there are five IRs in India. They are
* Central Insurance Repository Limited ( CIRL )
* NSDL Data Management Limited
* SHCIL Projects Limited
* Karvy Insurance repository Limited
* CAMS Repository Services Limited
However, like any initiative, this initiative is in its initial stages and will take some time to shape up so that the insured find it easy to use. Lets take a look at this initiative in more detail and address some of the lacking aspects.
Demat accounts are must
For getting your insurance in demat accounts, insured must open a demat account with one of the five IRs. Opening demat account requires know your customer (KYC) formality which is time consuming for most of the people. KYC norms require you to submit PAN card, address proof, identity proof, and photograph. This process is independent of the insurance process. However, this is a one time process and once demat account is opened, subsequent insurance can be bought in demat form.
You may not maintain all your insurance policies with one demat account
IRDA has not made it mandatory for insurance companies to offer insurance through all the IRs. The IRs manage the demat accounts. Hence if policy holders do have their demat account with an IR and that IR has no tie up with the insurance company from which the customer has taken the policy, he or she cannot dematerialize this policy with the existing demat account.
Lets take an example; suppose a policy holder, Anjan, has a policy from LIC. To convert this policy into dematerialized form, Anjan has to open a demat account with the IR which has a tie up with LIC. Lets say LIC has a tie up with Karvy and Anjan opens a demat account with Karvy. Now his LIC