What’s New in 2023: KYC Mandatory for All Insurance Policies

What’s New in 2023: KYC Mandatory for All Insurance Policies

In 2021, insurance companies requested the insurance regulator, Insurance Regulatory and Development Authority (IRDA) about making KYC (Know Your Customers) mandatory for all customers. Insurers demanded mandatory KYC rules for customers and a claims bureau in the industry to develop client profiles and claims history that, according to the insurance companies, will result in a sustainable business and will be beneficial to all stakeholders in the long term.

Recently, the insurance watchdog, IRDAI has given the green light to the insurance companies’ KYC requests. All national general insurers have recently been given directives by the Insurance Regulatory and Development Authority (IRDA) to comply with Know Your Customer (KYC) rules for all customers as of January 2023.

Effective January 1, 2023, providing Know Your Customer (KYC) papers will be required when purchasing or renewing health, motor, travel, and home insurance policies. The Insurance Regulatory and Development Authority of India (IRDAI) will need KYC requirements for the purchase or renewal of all insurance policies, regardless of their premiums. All forms of insurance, including life, general, and health insurance, are subject to this provision.

Why IRDAI made KYC Mandatory for All Insurance in India?

Currently, KYC papers are not required when purchasing non-life or general insurance plans such as health insurance, motor insurance, home insurance, and travel insurance.

Normally, a policyholder must produce a PAN card or Form 60 if the total insurance premium in a fiscal year is Rs 50,000 or higher. The new method has just pushed the KYC requirements from the time of claim to the time of insurance registration.

Formerly, it was optional for an individual to provide KYC paperwork when purchasing a policy. However, insurers must now ensure that they collect KYC papers from consumers. As a result of the new rule, the KYC requirements have shifted from the time of claim to the time of new policy acquisition.

Existing policyholders must contact the insurer and provide the necessary information. Customers who do not comply will be unable to purchase or renew their insurance policy.

The mandated KYC requirement has various advantages for both policyholders and insurance businesses. Here are the following advantages for policyholders and insurers:

How it is going to benefit insurers?

Greater fraud protection: Providing KYC data supports the verification of policyholder identities and reduces the risk of fraud. This is especially significant for people acquiring life insurance since it helps to guarantee that the policy is being purchased by the intended person rather than someone illegally misusing another person’s identity.

Lower risk of fraud: Having proper KYC information on file benefits insurance firms in detecting and preventing fraud. This can help in the preservation of the company’s financial stability and brand.

Better risk management: Accurate KYC information will help insurance providers analyze and manage risk more effectively. This is caused by the fact that having more information concerning policyholders helps the insurer to more accurately assess the possibility of a claim and set appropriate premiums.

How it is going to benefit policyholders?

Timely claim process: If a policyholder wants to file a claim, accurate KYC information can help to expedite the process. This is because insurance providers will have all of the essential and relevant information on file, which can assist to speed up the process and ensuring that policyholders receive their coverage benefits on time.

Greater consumer satisfaction: Insurance companies may boost customer satisfaction and develop deeper connections with their customers by delivering a more efficient and secure process. This can help to attract and retain customers, which is critical for the company’s long-term growth.

Enhanced data protection: Maintaining updated and accurate KYC information on file helps in keeping the personal and financial data of policyholders secure. This is particularly crucial in the current digital era since there is an elevated danger of data breaches.

Since insurance firms may expect to increase the accuracy of risk management and pricing with the KYC information, the risks of fraudulent claims will be reduced.

It will be a win-win for all stakeholders as the mandatory KYC paperwork will help in maintaining a centralized database of policy records.

KYC Process for the existing customers

The insurance regulator, IRDA has directed the insurer to collect KYC papers from existing customers within a certain time range. The time restriction for ‘low-risk’ policyholders will be two years, and one year for all other customers, including ‘high-risk’ clients. Many insurance companies are notifying clients through SMS and email to submit their KYC data on time. Please keep in mind that it is not presently required for existing customers to submit their KYC papers in order to renew their policy. Meanwhile, if your policy comes up for renewal after January 1, 2023, you will very certainly be required to produce visual identification (photograph) and address verification to your insurer in order to become KYC compliant.

Get in touch with the insurer and submit the relevant information as soon as possible if you have an existing policy and have not yet provided your KYC data to the insurer. It’s possible that you won’t be able to buy or renew your insurance policy if you are unable to submit your KYC information.

List of documents required for the Mandated KYC

Here is the list of documents a customer can be asked to provide by the insurer for the mandated KYC while purchasing or renewing all types of insurance policies:

  1. 1. Aadhaar Card
  2. 2. Voter ID Card
  3. 3. Passport
  4. 4. Driving License
  5. 5. NREGA Job Card signed by a state government officer
  6. 6. Letter by National Population Register consisting of demographic details
  7. 7. Any document notified by the central government from time to time

How Insurers can conduct KYC for their customers?

Here are different ways through which an insurance company can conduct the mandated KYC of their customers:

  1. 1. Consent-based Video Based Identification Process (VBIP)
  2. 2. Using KYC Identifier allotted by the CKYCR (Central KYC Registry)
  3. 3. Officially Valid Documents (OVDs)
  4. 4. PAN Card/ Form 60 (As applicable)

While submitting the KYC-related documents, make sure that you provide the necessary details only to verified and trusted sources as with this new advancement in the insurance sector there might be chances of fraud.

Winding up!

Ultimately, implementing KYC while purchasing an insurance policy would boost customer experience while also assisting insurers in carrying out all aspects of the insurance process in a simple and convenient manner. Therefore As, it is important to remember that if a customer fails to present KYC documentation, they may be unable to purchase or renew an insurance policy.

Leave a Reply

Your email address will not be published. Required fields are marked *

© 2021 PBPartners. All Rights Reserved | support@pbpartners.com

PB Partners - A Brand Under Policybazaar Insurance Brokers Private Limited
CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana - 122001
Policybazaar is now registered as a Direct Broker |Registration No. 742, Registration Code No. IRDA/ DB 797/ 19, Valid till 09/06/2024, License category- Direct Broker (Life & General)