E-Vahan Bima may lead to cost savings

Telangana is the first state to accept digital motor insurance covers; Irdai expects all states to follow by next year

If there is one thing less that is going to clutter the glove compartment of your car, it’s your car insurance policy. The Insurance Regulatory and Development Authority of India (Irdai) launched its digital motor insurance policy for all vehicles called e-Vahan Bima. Through this you don’t have to carry physical documents of your car insurance policy, you can just store the policy in your mobile and show it to the police when asked for policy papers. Telangana has become the first state to accept the digital policy format from 2 January. Irdai hopes that e-Vahan will be implemented across all states by 2017.

Under the Motor Vehicles Act, 1988, a third-party motor insurance is mandatory for all plying vehicles. Third-party insurance covers damage to life or property of a third-party by an insured vehicle. Other than third-party, a comprehensive motor policy also comprises own damage cover that insures vehicles against theft or damage. Though insurance is a statutory requirement, level of insurance is low.

“A recent study by Insurance Information Bureau of India (IIB) and the insurance industry indicates that 45-55% of vehicles are uninsured. In fact, close to 50% of private cars are uninsured after the first year. These vehicles are able to get by due to the black economy. Insurance policies are fabricated and traffic authorities have no way to verify policy details,” said S.V. Ramanan, chief executive officer, CAMS Repository Services Ltd, an insurance repository. An insurance repository maintains data of policies electronically for insurers and opens e-insurance accounts for policyholders.

But getting away without car insurance is going to get difficult as the new policies will come equipped with a quick response (QR) code that will help the authorities authenticate the policy immediately. Here’s a look at how it will work.

e-Vahan Bima

Last year in November, Irdai directed insurers to issue electronic motor policies in addition to issuing policies in physical form from December. Even with regards to physical motor insurance, Irdai suggested that a QR code be incorporated as a measure of additional security. QR code is a type of bar code that contains information about the motor insurance policy. So, as soon as the traffic police scans the QR code, all the details of the policy will emerge, and it will help the official verify the policy.

“All motor policies issued on or after 1st of December, 2015 shall essentially contain a Quick Response Code. This QR Code would be used to verify the authenticity of the electronic policy,” said Irdai’s November circular. “All policies now need to have a QR code to enable verification. This will increase compliance and increase penetration of motor insurance as it puts a stop to the black economy,” said Ramanan. In fact, insurers have been advised to help existing policyholders to get electronic policies with the QR code.

But to begin with Telangana is the only state to recognise and accept the digital motor insurance policy. “All motor policies, new and renewals, will be digitally issued, especially in Telangana. When a customer buys a policy or renews it, the insurer will send the online policy in a PDF form to the policyholder’s email ID apart from sending physical documents. It will also have a QR code which can be used for verification. In Telagana, the soft copy of the policies on smartphones is sufficient as evidence of insurance and authorities can verify the details using a QR code scanner,” said T.M. Shyamsunder, chief information officer and country head retail operations, Royal Sundaram General Insurance Co. Ltd.

When a traffic police scans the code, your policy details are retrieved either from the insurer’s database or the central database of IIB. “QR readers are easily downloadable on phones, and all the traffic personnel are being provided with QR readers through their phones in Telangana,” added Ramanan.

However, to be on the safer side, keep a print out of the policy, it will have the QR code for verification. Irdai is contemplating a unique code by which the policy details can be obtained online. A mobile app to give your policy details along with the QR code is also in the works.

You can also get a digital policy through your e-insurance account that lets you store all your policies electronically under a single electronic account. “Your insurer will need to have a tie-up with the insurance repository you have an account with in order to digitise your motor insurance policy. Today, the biggest advantage of e-insurance accounts is that policyholders can be easily contacted as all of their data is stored electronically, with the repository, who is entity neutral,” said Ramanan. Also, insurers in this case don’t have to send the physical policy documents.

In order to encourage the policyholder to open an e-insurance accounts for the purpose of digitising their motor insurance policy, the insurance regulator has waived off the know-your-customer (KYC) requirement at the time of opening an e-insurance account. And since KYC is not mandatory while taking a motor insurance policy, this check will be exempt from e-insurance accounts for the purpose of holding electronic motor insurance policies as well. “However, if other policies are to be held through eIA (e-insurance account), KYC would be necessary,” stated the handbook on e-Vahan issued by Irdai. You can read the entire handbook at www.irdai.org.in.

However, as Telangana is the only state to have accepted the digital motor policy so far, those in other states will still need to carry a print out of their policy as the traffic cop may insist on a physical document as a digital policy won’t be applicable.

Benefits of digital policy

The obvious benefit of a digital motor insurance policy is convenience. For the authorities, too, it is a win-win situation, as it ensures greater compliance—the QR code allows authorities to inspect and verify the policies. For the policyholders, there is added advantage of cost saving. However, cost saving may not translate into lower third-party insurance premiums as the premiums are tariffed and decided by the regulator ever year. But the own damage component of your motor insurance policy is decided by the insurer and as insurers save on costs, some of that savings may pass on to you.

“We may not see cost savings immediately as insurers still need to send physical copies of the insurance if not issued through the repository. But eventually as digital policies become the norm and physical ones are done away with, there will be cost savings, and insurers and policyholders will benefit,” said K.G. Krishnamoorthy Rao, managing director and chief executive office, Future Generali India Insurance Co. Ltd.

So, even if you may not benefit immediately as the traffic cops in your area may insist on seeing physical papers, digital policies are here to stay and be accepted. Very soon you will just need to pull out your cell phone and show the policy document.