All new insurance plans, including those for health, vehicle, travel, and home, must now be purchased with Know Your Customer (KYC) documentation.
Every kind of insurance plan, including life, health, and general insurance, must comply with the rule effective from January 1, 2023.
According to the Insurance Regulator and Development Authority of India’s mandate (IRDAI), previously, sharing KYC papers as part of a policy purchase was optional.
However, the insurers must now make sure that they obtain KYC documentation from clients.
The KYC criteria have been moved from the time of claim, to the time of the purchase of a new policy as a result of the new rule.
Existing policyholders must get in touch with the insurer and provide the necessary information. A customer won’t be able to buy or renew the insurance coverage in the event of non-compliance.
Photo IDs and Proofs Required for KYC Process
- Aadhaar cards
- Voter ID cards
- Driver’s license
- NREGA job cards signed by state government officials
- Letters from the National Population Register, containing demographic information, and any other documents announced by the central government after consulting the IRDAI are among the photo IDs and proof of address (PoA) that must be submitted as part of the KYC process.
Currently, if the total insurance premium for a given financial year is Rs. 50,000 or more, policyholders must provide a permanent account number (PAN) card.
According to IRDAI regulations, PAN or Form 60 must be obtained by a date that will be decided by the government, in the event of current policyholders with insurance that does not exceed an aggregate premium of Rs. 50,000 in a financial year.
Given that insurers have access to a more thorough picture of clients, the move would guarantee a smoother and quicker claim process.
As insurance firms look forward to increasing the accuracy of risk management and pricing with the KYC details, the dangers of fraudulent claims could be mitigated.
Additionally, it will support the upkeep of a centralized database of policy records, benefiting all parties.
Individual KYC Standards
- Insurance providers should take all reasonable steps to confirm the clients’ real identities.
- Insurers should exercise great caution to make sure that no contract is executed under a false or anonymous name.
- The insurer should employ efficient systems to accurately identify both new and existing consumers.
- Identity evidence, residence verification, and a current photo are requirements for proper identification.
- For current clients, an insurer will carry out the required KYC based on the suitability of the information previously obtained.
- When someone wants to provide an address that is different from their Aadhaar address, they must self-declare.
- Official documentation of people whose identities cannot be verified because of their age, injuries, illnesses, or other circumstances.
Judicial Entity/Person KYC Standards
- When dealing with judicial individuals or entities, insurers should use every possible means to locate the customer and its beneficial owner.
- Insurers will also be required to identify and confirm their legal position through a variety of documents to support information such as: Name, legal form, and evidence of the entity’s existence; Authority to impose regulations on the specific client; Address of the entity’s or person’s registered office; authorized parties claiming to represent such clients and their beneficial owners.
IRDAI Accepts KYC Practices
The insurer must use the following KYC procedures, per IRDAI regulations. A provider of car insurance may carry out any of the following KYC processes:
- Aadhaar-Based KYC: Both online and offline verification can be used to complete this KYC process.
- Digital KYC: in accordance with anti-money laundering regulations.
- Video-Based Identification: An electronic, paperless method of identification.
- By KYC Identifier: A special number that the Central KYC Records Registry assigns to the client.
- OVD: Using official documentation,
- PAN card or Form 60 (as appropriate), and any further documentation the insurer may require.
The insurance industry has adopted these IRDAI “Master Guidelines” in an effort to reduce money laundering and terrorist financing. These rules will be applied to all insurance sectors, with the exception of reinsurance transactions made by Indian insurance companies or foreign businesses operating in India.