The Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers to implement mandatory dematerialization of all new insurance policies by December 2022 - as per a news report. The regulator has also ordered that all existing/old insurance policies be dematerialized by December 2023.
You may have probably heard of dematerialization of shares, where your physical shares are converted into electronic format. Is the dematerialization of insurance policies similar to the dematerialization of shares? And, how will IRDAI's decision impact you as a customer? Let’s find out.
What Is Dematerialization And How Does It Work?
The process of converting your physical policy documents into a digital or electronic format is known as dematerialization.
After your policies are dematerialized or converted into an electronic format, they will be held in a Demat Account. A Demat account works quite similarly to a bank account. Just like you can deposit and withdraw money from a bank account, you can view your policies, make renewal premium payments, apply for claims, etc. in Demat account
Dematerialization of insurance policies has always existed. However, it was optional for customers and thus, not mandated by insurance companies. IRDAI is now making it mandatory in order to make all policies digitally accessible. How would this benefit you? Let’s see.
Benefits Of Dematerialization Of Insurance Policies
Locating Policies Will Become Easier
Many customers today maintain policies with different insurers in various locations, with no consolidated view or electronic access to the data. They probably maintain a folder on a drive or a physical file and make sure their family is aware of the records. Or they open an account on the Digilocker app and store the documents there.
With the implementation of mandatory dematerialization of policies, all your insurance policies will be kept under a single umbrella - making it easier for you and your family to locate them. Also, maintaining all policy documents will become easier - and the chances of misplacing or losing documents will be eliminated too.
Simplified Renewal, Claims Processes
If you store your policies on Digilocker or upload them on a drive, you will only be able to view your documents. You won’t be able to pay your renewal premium, make changes to the policy terms, etc.
For making the premium payment or making modifications to the policy terms, etc. the insurance company may ask for physical copies of your insurance policy. You may also need to submit physical copies in case of a health insurance claim or a maturity claim in savings (life) products, etc.
Insurance policies will lose their physical nature if dematerialization is implemented. You will be able to make changes to the policies online, and you won’t require a physical copy of the policy in the future for these activities.
Getting Renewal Reminders
Renewals and other policy reminders will be automated because of policy dematerialization. You may already be getting renewal and other reminders from insurance companies through email or text messages. If you keep all of your policies in the e-insurance account, you will also get alerts from the Demat company. So, there is minimal chance of missing renewal dates or other important reminders related to your insurance policy.
Retrieval Of Data To Become Easier
Dematerialization will make it easier to retrieve data between insurance companies. When you buy a life insurance policy, for instance, you need to give details related to the previous life insurance policies you hold. If you miss informing the insurer or give incorrect details, it may impact your claim in the future.
With dematerialization, insurers will already have information on all of your policies. So, you will be spared the inconveniences of issues during a claim in case you miss informing the insurer about your existing policies. Dematerialization will also eliminate the need to give such details multiple times when purchasing policies from different insurance companies.
So, that is all about the dematerialization of insurance policies. Opening a Demat account and storing all your insurance policies there will surely make your and your family's lives easier. It will also save you and your family both time and effort during claims, policy renewals, etc.