Will The New KYC Regulations Affect Motor Insurance? 2023
Will The New KYC Regulations Affect Motor Insurance?
Know Your Customer, or KYC is now required for all types of insurance, including vehicle insurance policies, as of January 1, 2023. The Insurance Regulatory and Developmental Authority have directed all insurers to begin the KYC procedure. Customers were not required to share their KYC documents before buying insurance coverage. However, due to new regulations, insurers must first perform a KYC exercise before offering range.
The introduction of KYC took place to simplify the insurance procedure and lower the number of fraud claims related to insurance. Thus, by January 1, insurance companies must obtain KYC documentation from their clients. The insurance industry regulator has given insurers a specific time to comply with the KYC requirements concerning current policyholders.
For low-risk policyholders, the insurance companies have been given two years, while for other clients, including high-risk ones, they have been given one year. The insurers will communicate the necessary KYC documents and additional information to policyholders by SMS or email. The institutional perspective for the insurance sector has undergone a transformation that is to be welcomed.
Transparency is crucial since insurance relies on trust as a fundamental premise. This is evident in the recent actions that have improved the insurance ecosystem’s transparency, facilitation, and frictionless ness. The most recent update to industry standards for transparency and accessibility is the requirement that general insurance plans comply with KYC compliance starting on January 1, 2023.
Despite the common perception that insurance is more of a luxury item, all car owners are legally obligated to carry liability coverage. As a result, it’s crucial to comply fully with the most recent IRDAI standard. The KYC compliance shift is anticipated to have a favourable impact on the insurance sector, from fraud reduction to more efficient claim settlement.
Here is everything you should know regarding the modifications and how they will affect policyholders.
What has changed, and what is the new mandate?
According to the law, starting on January 1, 2023, insurance companies must get KYC papers from clients before issuing any general insurance coverage. This holds true for any general insurance policy, including health, travel, two-wheeler, and auto insurance. This wasn’t a requirement for purchasing policies earlier.
Customers could previously purchase a policy and only be asked to present KYC documentation at the time of a claim, mainly if the claim amount was greater than Rs 1 lakh. However, customers must now supply KYC information when purchasing or renewing their plans. There is already a KYC procedure in place for other financial products like loans, bank accounts, Demat, mutual funds, etc.
It is a relatively simple process. This regulation now includes general insurance.
Three options for policyholders to comply with KYC requirements:
The C-KYC process is straightforward for anyone who has recently taken out a car loan, invested in mutual funds, held a Demat account, or invested in equities in the past few years. The C-KYC number for these policyholders, which can be given to the insurer at the time of purchase, would already be known. If they don’t have it, they can provide the insurers with their PAN so they can get the C-KYC number.
Even for purchases that are not insurance-related, e-KYC is a very typical requirement. For instance, if you wish to get a prepaid or post-paid cellphone number, e-KYC is a must. This digital verification technique is based on Aadhaar. They can quickly complete the process online and have it validated using an OTP, at which point they can provide the insurer with their KYC number and comply with the new regulation.
- Identity and address verification
Policyholders can give the insurer evidence of identity and proof of address if they don’t have any of the documents mentioned above. A copy of their passport or driver’s licence must be provided so the insurer can obtain their KYC number.
- Customer-centred strategy
This beneficial endeavour will improve transparency and facilitate information sharing in the industry. Additionally, this will provide insurers with a more complete understanding of their clientele and, as a result, the resources for a more precise risk assessment. Having the KYC documents prepared prior to filing the claim would also speed up the claim settlement process.
It will guarantee that the appropriate party receives the claim and assist in controlling false claims for general insurance plans. Insurers can more effectively assess and manage the risk with accurate KYC details. It can aid insurers in determining the likelihood of a claim and establishing reasonable premiums.
The safer and more effective procedures might aid insurers in enhancing client pleasure and fortifying bonds with policyholders. Additionally, effective practices can help in both gaining and keeping clients. The centralised data ensure that policyholders only receive appropriate insurance coverage.
All of the insurers will have access to all of the policyholders’ insurance-related information, including insurance policies, claims filed, claims settled, etc. The new procedure will make it easier to provide improved customer assistance and service for new policy issuance and renewals. As a result, there will be fewer false claims and improved service for purchasing and renewing policies.
What comes into play if you haven’t yet accorded your KYC information?
Customers will only be given a policy if KYC compliance has been properly followed because the regulatory standards are currently applicable to new insurance purchases. However, existing clients could be KYC-compliant in the upcoming 12 months.
Therefore, from January 2023 onward, existing customers whose policies are up for renewal will only be needed to submit KYC papers if the insurer actively contacts them. However, it is advised that they register for KYC within the allotted time frame.
Insurance companies will be able to better serve their clients by implementing KYC necessities for health and car insurance products. Due to the more rapid handling of claims, policyholders would also benefit from KYC right away.
However, Anup Rau, Managing Director and Chief Executive Officer of Future Generali India Insurance Company, states that this new criterion will only cause little friction when the consumer is onboarded.
edited and proofread by nikita sharma