With Finance Minister Mr. P. Chidambaram introducing Insurance repositories, insurance companies are expected to save Rs. 2,000 crores every year on new policies alone. To service a policy in physical format cost insurance companies around Rs. 600 a year, but if the same is held is dematerialized format it will cost insurance companies around Rs. 80 – 100 per year, thereby generating substantial savings to the insurance companies.
According to the estimates, savings could be more substantial, if existing 37 crores existing life insurance policies are changed into electronic format and stored with insurance repositories. A 10% transfer of policy from physical to demat form will generate savings of Rs. 1,850 for life insurance companies.
Under this system, there will be no cost involved to the customers. Customers can open insurance repository account free with any of the one of the five insurance repositories. All the cost will be borne by insurance companies, which is far less than servicing of policy in physical format.
The introduction of the above will not only benefit customers by way of low premium, on account of lower policy servicing cost, but will also benefit them in non – monetary terms. Customers will eliminate the risk of misplace or damage of policy, all details like renewal, nominee etc will be made available at one place etc. Paperwork will also be reduced significantly as because repository will act as a focal point of service.
Currently this facility is available only for life insurance policies, however with passage of time this will be made applicable to health, travel, home and motor insurance.
