Time-worn and dog-eared life insurance polices will soon be a thing of the past. If a proposal of life insurers goes through, as is likely, life polices will leave the physical format for a dematerialised form. That will help the country's crores of life policy-holders to store their policies in depositories in the demat form, just like millions of shareholders do now with their scrips.
Going by the move by the Life Insurance Council (LIC), the official representative body of the domestic life insurers, the life insurance industry is eager to dematerialise their existing and new life insurance policies.
Confirming the development, SB Mathur, secretary-general, Life Insurance Council, said , "The life insurers, who met on Friday, have approved the issue with a consensus .Now, we are moving to the Irda (Insurance Regulatory and Development Authority) for the formal approval. It is now up to the insurance regulator to take the scheme forward. I don't see any problem on this count.''
Mathur said massive depository support is required for dematerialising life policies, and whether NSDL can take the load or a new depositary has to be set up has to be examined. India may be having a low life insurance penetration rate but at 23 crore, it has the largest number of policies in the world.
Getting life insurance policies into the demat form was an idea of APJ Abdul Kalam, who had floated the concept when he was the President of India.
Kalam had asked the Life Insurance Corporation of India (LIC) to consider providing dematerialised policies to its policyholders. He had asked the Centre to consider necessary legal changes for enabling LIC to introduce dematerialised policies.
Banks will find it easy to give loans against such a policy. Also, eventually, dematerialisation can help establish a thriving secondary market for life insurance policies, as in the developed countries, where the original policy-holder can sell his policy for a consideration much before the maturity of the policy.
source: Indian Express Finance