policy can be converted into digital form. Suppose Anjan also has a policy offered by HDFC. He wants to convert this too into digital form using his demat account with Karvy. However, HDFC has tie-up with CAMS insurance repository. In this case, Anjan will not be able to get his HDFC policy into dematerialized form. He will have to open another demat account with CAMS to convert his HDFC policy.
This is certainly a big problem. The whole idea of digitization of insurance policies is to reduce the paper work associated with insurance policy and filling multiple forms for opening multiple demat account kills the very purpose of it.
There is still negotiation going on between insurance companies and IR
Insurance companies are still in the negotiation phase on tie up with IRs. As explained in the previous point, IRs will have to tie-up with multiple IRs to enable its customers digitize insurance policies. There will be cost involved in this and hence this must be factored.
Demat account costs money to maintain
Insurance premiums are increasing every year. On top of that, most of the demat accounts may come at an annual maintenance fee. This could be a deterrent to policy holders.
Not mandatory for insurance companies to tie up with all IRs
As mentioned, if insurance companies do not tie-up with all the IRs, policy holders will have to open multiple demat accounts. This may increase the cost for policy holders as well as insurance companies. This means higher premium. It was mandated in the initial policy document that insurance companies have to tie up with all IRs but the revised guidelines have taken out this requirement.
These problems are, however, initial problems. Whenever there are new initiatives, questions are bound to come up and it should. This would only make the initiative more successful in the long run. Finance ministry is keen to ensure that investors can manage their financial assets in one demat account. Hopefully, things will improve for the better but for now, there exists a need for more reform and clarity on e-Insurance.