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KYC Mandatory For Buying New Health, Auto, And Travel Insurance

  • Author :
  • TATA AIG Team
  • Published on :
  • 30/07/2023

As of 1st January 2023, the IRDAI (Insurance Regulator and Development Authority of India) has stated that providing KYC (Know Your Customer) documents will be mandatory for buying insurance. This rule will be instated for all insurance policies irrespective of their premiums. It will apply to all types of insurance.

KYC in insurance wasn't originally mandatory for buying non-life or general insurance policies like health, travel or insurance for your car. The customer was only to present their PAN and Adhaaar during claims processes greater than ₹1 lakh. This new rule, however, has shifted the KYC requirements from the claims process to the time of policy purchase.

So, What Is KYC?

KYC, or Know Your Customer/Client, is an effective way for institutions to verify and confirm a customer's or client's authenticity. RBI first introduced this as the only mode of verification and was later adopted by other financial institutions later on.

As of 2004, the Reserve Bank of India has made it mandatory for all Indian financial institutions to verify the identity and address of all clients who want to carry out financial transactions with them.

The customer is required to submit KYC documents before they invest in various financial institutions. This verification process has also been introduced by the IRDAI as a new standard when purchasing insurance policies to curb money laundering and insurance fraud.

Is KYC Mandatory For Insurance? - What New And Existing Policy Holders Need To Know

Before 2023, sharing KYC documentation was completely voluntary when purchasing general insurance policies. However, starting from 1st January 2023, it will be mandatory for you to present your KYC documents when buying any new non-life insurance policy - regardless of the premium amounts.

What Do These Changes Mean For Existing Policyholders?

Existing policyholders must submit their KYC documents to their insurer within a specified time frame. They will be alerted by SMS or email to submit their documents on time. The time frame for low-risk policy holders will be 2 years and 1 year for 'high risk' and other policy holders of other insurance plans.

Suppose your policy is due for renewal after January 2023. In that case, you must present your KYC documents to your insurer, such as your photo identity and address proof. If you cannot provide your KYC details, you won't be able to purchase or renew your insurance policy.

Before this, policyholders were required to produce their PAN card of Form 60 if their aggregate insurance premium was ₹50,000 or more in a financial year.

How Will These Changes Benefit Policy Holders?

These changes introduced by the IRDAI will ensure faster and more secure processes that are aimed at cutting down on insurance fraud and any money laundering activities. Here are two main ways policyholders benefit from these changes:

Centralised Data Bank And Easy Renewal Processes

Having your KYC details on file with the insurer can help to ensure that policies are appropriately underwritten and that you are eligible for the coverage you're applying for. In addition, having your KYC in insurance can help insurance companies build a centralised data bank that can help maintain your policy records and allow for easy data retrieval. This can be highly beneficial in the long run.

Insurers can also easily check the customer's claims history under different policies, even when bought from other insurers. Introducing KYC processes would ensure better policy purchase and renewal services, leading to better customer satisfaction.

Faster Claim Settlement Process

KYC in insurance will also help provide a more detailed customer profile, allowing for a faster and more seamless claims process. It will also ensure that there are no fraudulent claims and that all payments are made to the rightful policyholders.

This streamlining is because policyholders will no longer have to present their KYC details during claims processing as the insurers already have them on hand - Since customers will have produced them at the time of purchase or renewal.

How Does It Benefit Insurers?

Having a customer's KYC details can help encourage accurate risk assessment and pricing and prevent fraudulent claims. It can also improve customer satisfaction by ensuring all policies are issued correctly and efficiently. Overall, KYC in insurance helps protect the interests of both the policyholders and insurers.

KYC Methods Accepted By The IRDAI

The IRDAI has released a list of master guidelines on Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) that detail the accepted forms of KYC.

The methods listed here will be used to verify customers/clients whenever they want to purchase a new insurance policy. For example, the KYC form for health insurance can be done using any of the methods listed here.

  • Aadhar-based KYC (can be done online or offline).

  • Digital KYC as per PML (Prevention of Money Laundering) rules

  • Submission of KYC documents in-person.

  • Video-based KYC Identification.

  • Through KYC Identifier (Central KYC Records Registry).

  • PAN card or Form 60, along with any other documents the insurer requires.

KYC Documents Needed For Renewing Or Buying New Health, Auto, And Travel Insurance

The documents required for these insurance policies will be the same unless specified by the insurer. However, some documents concerning the insurance policy you purchase may be specifically asked for. The KYC relation in car insurance means you need to complete your KYC authentication before you purchase or renew the insurance for your car, health or travel.

Here are the KYC documents you will need to present:

  • Passport.

  • Driving License.

  • Aadhar card.

  • PAN card.

  • Voter's Identity Card.

  • Passport-size photograph.

  • NREGA (Mahatma Gandhi National Rural Employment Guarantee Act) card signed by a State government officer.

  • A letter issued by the National Population Register containing your name and address details.

Much like motor insurance, KYC documents are now mandatory. It is to be noted that KYC also plays an important part when you buy car insurance. This verfication process protects the insurer and customer from fraudulent claims.

If you have not updated your KYC details with Tata AIG, it is possible to do that when you undertake the car insurance renewal online process. Hence, when renewing your policy online, you can simultaneously update your eKYC to ensure a safe and secure experience!

Conclusion

The KYC process has been extremely simplified so that everyone can immediately have their KYC details updated and authenticated. This enables them to enjoy smooth and secure processes when it comes to buying or renewing insurance policies.

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Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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