The Telegraph
Since 1st March, 1999
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Policy push to ease LIC paper pain

New Delhi, Sept. 28: LIC policyholders who have trouble keeping track of their policy documents, worry no more.

The insurance behemoth has decided to take the first faltering step towards a paperless documentation system. The corporation is toying with the idea of introducing the system of dematerialisation, which revolutionised the stock markets almost a decade ago.

LIC chairman T.S. Vijayan today said the corporation would examine the legal validity of a scheme for paperless policy documents.

If and when it is introduced, it could take the hassle out for policyholders who have a tough time maintaining bits of crumbling documents for close to a quarter of a century to be able to collect the cash at the end of a policy tenure.

The idea for paperless insurance policies was floated by President A.P.J. Abdul Kalam at the launch of Jeevan Madhur — a micro insurance policy — on the occasion of LIC’s golden jubilee celebrations.

The demat scheme will enable easy storage of policies. “There may be a need for change in certain provisions of the insurance act both at the Centre and the states. I’m sure the government may consider implementation of such changes to introduce demat policies,” said Kalam.

No matter how attractive the idea sounds, the process of dematerialisation will be a Herculean task for LIC which has an existing policy base of around Rs 19 crore.

Of this, nearly 3.15 crore policies were fresh policies sold last year.

“The policy is a legal document, which can be endorsed to another person. I can assign my policy to a bank, (but) nomination under the policy has to be registered,” said Vijayan.

He said a demat scheme will have to address these issues. “We will look at the feasibility of the demat scheme. We have to talk to companies that can hold dematerialised policy documents.”

“The process of dematerialisation calls for changes in the legal framework. Along with the insurance act, a few other acts need to be amended. This may take some time,” Vijayan later told The Telegraph.

Supporting Kalam’s proposal, Vijayan said LIC had received several complaints last year arising from either loss or poor maintenance of policy documents. “May be, demat is the way out,” he added.

If the demat scheme is implemented, each policy holder will be given a particular number that will be used in all the three activities of surrendering the policy, withdrawing money and title changes.

Vijayan said the corporation has already embarked on a massive computerisation programme and dematerialisation should not pose any major hiccup.

Asked whether LIC would think of outsourcing the task of dematerialisation to depositories like National Securities and Depositories Limited (NSDL) and Central Depository Services Ltd (CDSL), Vijayan said, “We will consider those options when we come close to it.”

He, however, did not rule out the possibility and said, “We have been working with the depositories on other issues. So, we know how they function.”

LIC says no to IPO

LIC has ruled out plans for an initial public offering (IPO). “Coming out with an IPO would require an amendment to the LIC act and the corporation will have to be converted to a company. There are no such plans,” said Vijyan. The statement assumes significance since there has been a lot of speculation that the country’s largest insurer may come out with an IPO to raise money.

The chairman also said the corporation would dip into its own resources to raise Rs 7,000 crore to increase its solvency margin to 150 per cent in the next two years from the current level of 130 per cent.

Vijayan said LIC would invest 8 to 10 per cent of its incremental income in the equity markets, but the pattern of investment can be changed to suit customers’ preferences in unit-linked products.

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