LIC can create its own depository for life insurance policies

LIC sees a huge business opportunity in the dematerialization of life insurance policies. LIC has about 70 percent share in the life insurance market. LIC issues about 2 crore new policies every year. Apart from this, the total number of its policies issued earlier is at least 22 crore.

LIC can start a depository for life insurance policies. For this it can create a separate subsidiary. It is going to talk to insurance regulator IRDAI in this regard. LIC is the country’s largest insurance company.

LIC is seeing huge opportunities in the depository business. Actually, IRDAI has issued a deadline for dematerialization of life insurance policies.

It will be mandatory for all government and private life insurance companies to issue policies in electronic form from December this year. Currently, these companies issue policies to the customer in physical form. There is a fear of it getting lost, damaged, stolen, etc.

As per the instructions of IRDAI, all life insurance companies will have to start converting all existing or old policies into electronic form from December next year.

Due to this, customers will no longer have the security of their policies. Like shares, life insurance policies will also be in demat form only.

According to CNBC Awaaz, LIC is seeing a huge business opportunity in the dematerialization of life insurance policies. LIC has about 70 percent share in the life insurance market. LIC issues about 2 crore new policies every year. Apart from this, the total number of its policies issued earlier is at least 22 crore.

The country’s largest life insurance company will have to spend Rs 1200-1400 crore on dematerialization of its policies. LIC does not want to let go of this opportunity to earn.

If it creates its own depository, it will not only get this amount but it will also be able to earn a lot by providing dematerialization or demat facility to other companies.

The facility of depository for insurance policies in the country was first started in 2013. There were 5 insurance repositories in it. These include CAMS Repository, Karvy, SHCIL Projects, NSDL Database Management (NDML) and Central Repository of India. Now their number has reduced to four. SHCIL has surrendered the repository license.

The electronic form of insurance policies was beneficial for everyone. But, it did not get a good response from policyholders and insurance companies.

The reason for this was weak demand and additional cost for insurance companies. The second reason is that unlike shares, insurance policy transactions do not take place on a regular basis in e-insurance accounts.

Due to this, its demand is low. This system is already in place in the case of shares. 99.9 percent of equity transactions take place in demat mode.

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