New IRDAI Regulations for KYC to Buy Health, Auto, And Other Insurance

Jan 12, 2023 / Reading Time: Approx. 3 mins

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The insurance watchdog Insurance Regulatory and Development Authority of India (IRDAI), has recently announced that starting January 1, 2023, Know Your Customer (KYC) documents will be required for all new health, motor, travel, and home insurance policies. The rule applies to all types of insurance, including life insurance, health insurance, and general insurance, irrespective of the policy premium.

While KYC has been a mandatory requirement to buy a life insurance policy, it was not mandatory to buy health insurance and general insurance, such as travel insurance, motor insurance, and home insurance. Until December 31, 2022, providing KYC documents, such as PAN card and Aadhar card at the time of a health insurance policy claim, was required if the claim amount was greater than Rs 1 lakh.

So, as per the new rules, from January 1, 2023, the insurers are required to conduct a KYC exercise before selling an insurance policy. The insurance regulator has provided a time frame to the insurers for collecting KYC documents from existing customers. The insurers can complete the KYC of their low-risk customers within 2 years and high-risk customers within 1 year.

To ensure all the existing customers are KYC-compliant, the insurers have started intimating the customers through emails and SMSs. While it is not mandatory for existing customers to complete their KYC, if your policy is due for renewal after January 1, 2023, you likely have to provide the KYC documents to the insurer.

 

In separate news, apart from the new KYC rules, the regulator has asked the life insurance and health insurance companies to settle the Covid-19 claims at the earliest. It was seen in the first and second waves of Covid-19 that some hospitals were asking for deposits for Covid-19 treatments despite the patients having cashless policies. The IRDAI has urged insurers to ensure that hospitals do not take such deposits for covid-19 hospitalisation. The insurers are advised to reduce paperwork and report data in a set format to avoid discrepancies.

How to become KYC compliant?

Existing customers who have not yet submitted the KYC documents to the insurer can contact their insurance provider to complete their KYC. The new/existing customers who are unable to complete their KYC may not be able to purchase/renew their insurance policy.

KYC documents include photo IDs, such as PAN card, Aadhar card, Driving Licence, passport, etc., and Address proof, such as utility bill, Aadhar card, driving licence, passport, voter ID, etc.

Customers are also required to submit a PAN card if the insurance premium is Rs 50,000 or greater than that in a financial year. Existing policyholders whose insurance premium does not exceed Rs 50,000 in a financial year are mandated to submit a PAN card or Form 60 within the specified date by the IRDAI.

New IRDAI Regulations for KYC to Buy Health, Auto, And Other Insurance
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Here are the KYC methods accepted by the IRDAI:

  1. Aadhar-based KYC (can be done online as well as offline)

  2. Submission of KYC documents in-person

  3. Digital KYC

  4. Video-based KYC

  5. Through KYC Identifier (Central KYC Records Registry)

How will the new regulations benefit insurers and policyholders?

  • Since insurers have to make sure that the policyholders are KYC compliant at the time of purchasing the insurance policy, they will not have to ask for the KYC documents when the policyholder makes a claim. This will ensure a faster claim settlement process.

  • With access to accurate KYC details, insurers can identify individuals better and curb frauds like money laundering.

  • With accurate KYC details, insurers can better assess and manage the risk. This can further help insurers in assessing the likelihood of making a claim and setting appropriate premiums.

  • The secure and more efficient processes can help insurers improve customer satisfaction and build stronger relationships with the policyholders. The efficient processes can also help in attracting new customers and retaining existing customers.

  • The centralised data ensures the policyholders get only the eligible insurance coverage. All the insurance-related data of all the policyholders, such as insurance policy, claims made, claims settled, etc., will be available for all the insurers to verify. This will reduce fraudulent claims and provide better service in terms of policy purchase and renewal.

 

To conclude:

These master guidelines by the IRDAI aim to prevent money laundering and terrorist financing in the insurance sector. The new rules are applicable to both; life insurance and non-life insurance, irrespective of the policy premium. It will ensure seamless and efficient insurance processes, benefiting both; customers and insurers.

 

Warm Regards,
Ketki Jadhav
Content Writer



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