Insurance
E-insurance: The fine print that can make IRDA initiative fail

Insurance Repository is a good initiative from IRDA. It will help the insurers and insured with inherent benefits of insurance policy demat. But, will you really be able to demat all your insurance policies? Will insurance companies tie-up with all the repository companies?

The insurance repository system was introduced with great fanfare by finance minister, P Chidambaram on 16 September 2013 to digitise physical insurance policies. E-insurance policies will help insurers to save costs on printing and dispatching policies. Insurance companies will save crores of rupees every year that is spent on storing of physical insurance documents and repeat KYC. While the IRDA (Insurance Regulatory and Development Authority) e-insurance initiative is commendable, there is one blunder.
 

As a Moneylife subscriber Dr Visvanathan Krishnaswamy pointed out: “An insured can have an account only with one IR. However, the insurance companies need not have a tie-up with all the IR, thereby negating the whole value of the single point e-policy account concept.”
 

Will you really be able to enjoy the comfort of storing all your policies electronically under a single e-insurance account just like you hold your stock certificates and mutual fund units online in dematerialised form? The answer depends on whether every insurance company will tie-up with each of the five Insurance Repository (IR) firms. IRDA has given freedom for insurers to tie with one or more IR licensed by them, which is a flaw.
 

The insured can open account with only one Insurance Repository (IR). If an insurance company has not tied up with that IR then how can demat of the insurance policy become possible? For instance, an insurance company may have IR tie-up with Karvy and the insured may have account with CAMS. How can an insurance policy be shown in demat if the insurance company does not have a tie up with CAMS as well? Moreover, the five companies have been given the status of insurance repositories are given licence that will be valid only till 31 July 2014.
 

One customer can have insurance policies from multiple insurers and the only way to get all the policies digitised for this insured is that those multiple insurers have tie-up with the IR where customer has opened e-insurance account. If not, then the IRDA initiative will miserably fail. The customer may have some policies in demat while others may not be. Would they benefit with partial demat? No.
 

Moneylife had written to 10 insurance companies and IRDA to get their response. Unfortunately, only five insurers have responded. According to one life insurer, “We are in process of negotiations with IR about the cost to digitise policies per person and annual servicing fees. We cannot tell if we will sign agreement with all the IRs or not.” It means insurance companies will prefer to tie-up with the IR that offer best rates and they may not tie-up with all the five IRs. If so, e-insurance will be a non-starter.
 

IndiaFirst Life Insurance is amongst the first to offer all life insurance policies in demat format. They also have tied-up with all the five IRs licensed by IRDA. According to Karni Arha, chief financial officer, IndiaFirst Life Insurance, “For depositing the policy, the insurance company needs to have tied up with that respective IR. As IndiaFirst has already tied up with all the five approved IRs, we can deposit our customer policy in his respective account without any issues.” 
 

According to TR Ramachandran, CEO and MD, Aviva India, “Given that e-stamping (Mudrank) facility is still not available in Haryana, we have yet not frozen our IR tie-ups. We are working with multiple IR players to devise and streamline a process that will add value to our customers. The IR concept is based on the premise of customer convenience. As the adoption of IR increases it will be become imperative for both the customer and the insurer to provide/ leverage several options. Currently, an insurer need not tie up with all IRs, and an insurer cannot issue a demat policy to someone who does not have an account or is unwilling to open an account with the IR options provided by that insurer.”

 

According to Rajesh Sud, CEO and MD, Max Life, “We believe a life insurer will need to partner with all five IRs, since the choice of IR is left to the customer. Max Life is currently in the process of evaluating the technical as well as commercial aspects of all five IRs, and at the same time we are in the process of readying our systems for this change. Keeping in mind that the insured can open account only with one IR, we are considering all five IRs.”
 

HDFC Life has tied-up with NIR (National Insurance policy Repository), CIRL (Central Insurance Repository Ltd) and SHCILIR (Stock Holding Corporation of India Ltd Insurance Repository). According to them, “The infrastructure for the dematerialisation of insurance policies has just started and we are in the initial stage with some tie ups in place. When the project takes off we expect every insurance company to tie up with all the IRs and cannot restrict the tie up to few IRs only.”

 

Dr Krishnaswamy, says, “After opening an account with CAMS Repository, I have now come to realise that not all companies are as yet with the IR. Further, none of the companies I hold policies in (LIC, Max Life, Aegon Religare, ING Vysya, Max Bupa) have a tie up with any of the IRs as on date. This aspect has not been publicized by the IRDA, Media or the repository websites.”

 

IRDA has already stated, “Both new and existing life, annuities, health and general insurance policies can all be credited to this account. However, during the initial phase, the life insurance policies would be credited to this account. The general insurance and group insurance policies would be credited subsequently.”
 

According to Mr Ramachandran, “The dematerialisation of insurance policies is certainly the future and will benefit customers as they will be able to manage their policies at their convenience. It will help insurance companies address issues around contactibility, delivery of documents, managing policies and KYC norms. It will also help in checking frauds and mis-selling cases, and increase transparency. Over time, this will also allow companies have improved access to a wider consumer base within India and reduce operational costs significantly.”

 

The five IR companies are: NSDL Database Management Ltd (NDML) National Insurance Repository, Central Insurance Repository Ltd, Stock Holding Corporation of India Ltd Insurance Repository, CAMS Repository Services Ltd and Karvy Insurance Repository Ltd.

E-Insurance launched; IndiaFirst offering demat for all policies

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COMMENTS

IndianMoney

3 years ago

This is a valid point and Insurance Companies will have to tie up with all five insurance repositories.The customer is free to choose his own insurance repository and if the insurance Company is left to do the same then e-insurance repository is a non starter.The idea of a customer being able to access all his insurance policies of all insurance Companies in a single statement is certainly good but its success depends on its implementation.

Param

3 years ago

i still don't understand why insurers MUST tie-up with all depositories.
why can't the depositories talk to each other & thus reduce cost for insurers & end users?

PRABHAT

3 years ago

BUT INSURANCE CO OFFICIALS ARE NOT AWARE OF IT ?

gcmbinty

3 years ago

It is too short a time for any scheme get on board - having been launched on Septembeer 16, 2013 only. The flaw mentioned in the story by Dr Visvanathan Krishnaswamy is not incorrigible being technology lapse. I am sure the software engineers will be able to solve the problem shortly and the insured will benefit.

REPLY

Dr VS Gogia

In Reply to gcmbinty 3 years ago

This is not something that is attributable to technical glitch. This is a flaw in IRDA guidelines and can be corrected by IRDA by modifying the guidelines, mandating all insurers to get registered with all the IRs.

raj

In Reply to Dr VS Gogia 3 years ago

True. IRDA has to correct it. Dealing with multiple IRs will increase cost for insurance company, but necessary for e-insuranec to work

SANJAY KUMAR

In Reply to raj 2 years ago

Dear Mr Raj Pradhan

Thanks for educating us vide your valed news article dtd 21.10.2013 on e-Insurance intiated by IRDA.

1. Whether all the insurers have decided to have agreeemnt with all the five insurance repository registered by IRDA by now?

2. What about e- Insuarnce for general insurance policy ? For that how to convince the general insurance companies. If it happens it would be good for policy holder and the companies both.

3.Whether FDI of 49% allowed by government would also help the customer in e- Insurance ?

Looking forward for your kind reply.

Thanks

Sanjay Kumar
Ahmedabad

Jagdish Motwani

3 years ago

The Insurance Contract (Policy) is not on par with Shares, Bonds or MF. Each insurer has differrent set of Policy T&C & fine prints & also format for issuing Policy Schedules are also differrent. Further, in each sub-class of policies in general insurance there are Add On Covers & Extensions as well as some covers have option to be deleted. Hence, this facility specially for non life insurance may not be benificial to customers though it may be of cost savings to insurers. There are no TATs' for policy issuance by insurers & this may also be a vital factor. A veru simple example for abuse by insurers will be to avoid Free Look Period by issuing policy in Demat form. I feel all this is being done to facilitate insurers' cost savings, etc. & at the same time only to keep big brokers of financial houses who will have edge over small agents by their association with Repository Participants where they can arrange A/Cs'.

KAVIRAJ B PATIL

3 years ago

I wonder why no one has observed a similar mess with regard to KYC for Mutual Funds. Though I have invested in a scheme of UTI some two decades ago, when I and my mother wanted to invest in some fund recently, I completed the KYC and submitted it through Bajaj Capital. This was in March 2013. Later, when my mother invested in another scheme, the fund refunded the amount saying that KYC was not done. Now, after 7 months after submitting KYC, my status as well as my mother's is shown as under process. When I approached Bajaj Capital, they say this is a common problem and the organisations ie CVL, NDSL etc., do not even respond to emails. Investors are ready to invest but then the government is only interested in making everything complicated.

REPLY

Dr VS Gogia

In Reply to KAVIRAJ B PATIL 3 years ago

Moreover, on KYC Update with KRA the email and phone numbers are not updated. Even with change in city on address update, the phone/mobile numbers continue to be the old ones. For this one has to separately write to AMCs in each scheme where one i s invested.

Param

3 years ago

why cant they do it the same way as RTAs & Share Depositories - they need to talk to each other & not bother the customer or insurer about the technical details.

pravsemilo

3 years ago

A similar issue is plaguing the mutual fund industry. Ironically it is the same intermediaries involved.

Each AMC has a RTA. Presently there are CAMS and Karvy. Some AMC do this inhouse like Franklin Templeton (FTAMIL). Investors have the option to get a consolidated statement emailed to their registered email address from the website of CAMS and Karvy. This also includes the holdings in FTAMIL. You don't have to register with them for this.

Off late some AMCs have started theirs own RTA (Sundaram and BNP Paribas). The consolidated account statement doesn't include holding from these AMCs. Worse was that in the initial days you had to register and use a password to get the account statement. This adds to one more user id-password combination to be remembered.

I had enquired at CAMS if they could also include holding from Sundaram to which they said no. I also raised a complaint at SEBI's SCORE against the password requirement at Sundaram. The complaint was forwarded to Sundaram and they informed me that they don't have the password requirement anymore. Not sure if this was done by themselves or on behalf of my complaint. But this move has put me off from investing in any of the Sundaram schemes. It is very inconvenient to go to their office instead of going to a RTA where I can invest in many AMCs. Getting a statement of account also adds to the trouble.

sivasankaran

3 years ago

THE INSURANCE COMPANIES SHOULD BE MANDATED TO HAVE TIE UPS WITH ALL THE DEPOSITERIES

REPLY

Param

In Reply to sivasankaran 3 years ago

i don't think this is right, just like the other option would be to make customer have tie-ups with all depositories...
insurers can also choose the best service provider - the only need should be to ensure the depositories talk to each other (in a mandated common protocol) to ensure seamless service to customer/insurer?

raj

In Reply to Param 3 years ago

Making customer tie-up with all depositories is not correct as it will not give all the policies at one place. Either insurers have to tie-up with all repositories or depositories talk to each other. Moreover, don't know why 5 repositories were really needed? It's only creating business for them.

raj

In Reply to sivasankaran 3 years ago

I agree

sivasankaran

3 years ago

THE INSURANCE COMPANIES SHOULD BE MANDATED TO HAVE TIE UPS WITH ALL THE DEPOSITERIES

Supreme Petrochem Q2 net profit zooms 315% on strong overseas revenues

Supreme Petrochem's September quarter net profit increased significantly at 315% to Rs26.55 crore on strong overseas revenues, despite higher tax expenses

Supreme Petrochem Ltd (SPL), India’s largest producer and exporter of polystyrene polymer, reported a 315% jump in its net profit to Rs26.55 crore in September quarter compared with Rs6.40 crore a year ago period.
 

For the quarter to end-September, SPL reported 28% growth in total revenues at Rs791.90 crore compared with Rs618.54 crore a year ago period. During the second quarter, the company’s overseas revenues increased 110% at Rs205.05 crore compared with Rs97.43 crore a year ago and domestic revenues increased only by 12% at Rs586.85 crore, overseas revenue leads  company to achieve significant growth during September quarter.
 

During the September quarter the company also paid 302% higher tax of Rs13.02 crore compared with Rs3.24 crore a year ago period.
 

"The likely rationalisation of styrene monomer (main raw material) prices and stabilisation of rupee will help to improve market sentiment and assist demand growth in the last two quarters of current financial year," the company said in a release.
 

At 2.50pm on Monday, Supreme Petrochem was trading 5% higher at Rs59.3 on the BSE, while the benchmark Sensex was marginally down at 20,826.

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MCX-SX looking for new MD and CEO

MCX-SX invited application from suitably qualified and experienced candidates for the post of MD and CEO following resignation from Joseph Massey

MCX Stock Exchange on Monday began search for a new managing director and chief executive to head the Exchange, whose group entities remain embroiled in a major crisis emanating from Rs5,600-crore payment default at National Spot Exchange Ltd (NSEL).

 

MCX-SX was set up by Jignesh Shah-led Financial Technologies group, which has also promoted NSEL and commodity bourse MCX, among others.

 

In a public announcement, MCX-SX invited application from suitably qualified and experienced candidates for the post of MD and CEO.

 

While renewing MCX-SX’s licence for another one year, markets regulator Securities and Exchange Board of India (SEBI) in September asked the Exchange to set up a panel of independent directors to oversee its operations in the wake of questions being raised about ‘fit and proper’ status of its promoters.

 

Earlier this month, Joseph Massey resigned as MD and CEO of MCX-SX, while Jignesh Shah also had to quit from its board.

 

After these resignations, MCX-SX had said that U Venkataraman, whole-time director, would assist the special committee of public interest directors in carrying out the functions of the exchange.

 

The group has seen a string of resignations in the past few weeks at its various entities. Last week, commodity bourse MCX managing director and chief executive officer Shreekant Javalgekar also submitted his resignation.

 

MCX-SX is the country’s newest stock exchange and began operations in currency derivatives segment from October 2008, while it commenced operations in capital markets trading in February 2013.

 

Inviting applications for the post of MD and CEO, MCX-SX said, “The candidate must be qualified in the fields of capital market, finance or management and possessing sufficient experience in related fields for at least 15 years.”

 

The MD and CEO would report to the board of directors and would be responsible for conduct of affairs of the exchange under the direction and supervision of the board.

 

He/she shall also be responsible to perform various functions under the bye-laws, rules and regulations of the exchange and also to comply with various statutory and regulatory requirements, it added.

 

The appointment will be subject to approval of SEBI and the candidate shall hold office for a term of three years which could be extended, it added.

 

The candidate’s age should not be more than 50 years as on 31st October, it said adding that age and experience limits may be relaxed for deserving candidates at the discretion of the selection committee.

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