KYC Process in Car Insurance: Features, Guidelines & IRDAI Regulations

Posted on: Apr 14, 2023 | 3 mins | Written by: HDFC ERGO Team

KYC Process in Car Insurance: Features, Guidelines & IRDAI Regulations

Why should you buy a car insurance policy? Well, apart from meeting the mandatory statutory requirements, it can protect your car and finances at the same time. The IRDAI safeguards the interest of policyholders while working towards the growth of the insurance industry. As part of its regular retrospection, it has recently made changes to insurance policies. For your next comprehensive car insurance, you will need to complete the KYC process.

The IRDAI has made KYC norms mandatory from the 1st of January, 2023. Before you buy any policy after the 1st of January, you will need to complete the KYC verification process. If you are not too familiar with it, here is everything that you need to know about the KYC norms.

What does the KYC process in car insurance mean?

The KYC verification process is mandatory before any financial transactions or buying an insurance policy. If you are planning to buy new car insurance, it is important to complete the KYC first. Know Your Customer or KYC, is a simple process that authenticates the identity and address of the insured. To complete the authentication, an insurance provider would need access to the PAN card of the insured, Aadhar card, and proof of address.

Insurance providers can regularly update the KYC to ensure that the insured is genuine and there are no instances of money laundering. To complete the process, information about the insured is first collected. The insured must then fill out a KYC form and submit all the supporting documents along with it. Once the documents are verified, the KYC process is complete.

KYC norms for car insurance policy

Here are some of the features of KYC that new car insurance buyers should know.

1. All insurance policies purchased after 1st January 2023 require the insured to complete KYC prior to the purchase.

2. To complete the process, the insured needs to submit an identity proof and proof of address. Common documents include PAN cards and Aadhar cards.

3. For existing policyholders, the IRDAI has issued a couple of timelines to collect KYC information. The KYC information must be collected within 2 years for low-risk policyholders and within 1 year for high-risk policyholders.

4. Insurance providers will relay the information to existing customers either via SMS, email or by calling them.

Perks of KYC in car insurance

The IRDAI has made KYC norms mandatory for all new policies purchased after the 1st of January, 2023. While it was optional earlier, now it applies to general insurance, life insurance, and health insurance. Here are some of the perks of getting KYC done for a car insurance policy.

1. Faster settlements:

Insurance providers will already have the KYC information of policyholders, even before issuing them a policy. This will make way for a seamless claims process, and it is expected to be faster as well. Since the policyholders need not provide KYC details while filing for a claim.

2. Prevent fraudulent activities:

A lot of insurance providers face fraudulent claims every single year. The introduction of KYC prior to buying a policy is likely to curb this.

3. Easier policy renewals:

Since insurance providers will have access to KYC information, it will enable them to provide policies that are accurate and issue policies only to policyholders who are eligible. Due to the additional information at hand, insurance providers will be able to provide better and more accurate services.

In general, the new KYC norms will bring in a lot of accuracies and increase the effectiveness of buying insurance policies in the country.

Documents that you need for KYC processing:

To enable KYC processing, you will need to furnish some documents for verification. The following are the different documents that qualify for verification.

1. Proof of identity:

-PAN card of the insured.

-Driving licence/Passport/Voter ID card/Aadhaar Card.

-Identity Cards issued by other government authorities, universities or educational institutions, and/or financial institutions.

2. Proof of address:

-Copy of utility bills such as electricity bills, phone bills, gas connection bills, etc.

-Proof of residency that is issued by a notary, elected members of the legislative assembly, gazetted government official, etc.

-Account statement of your bank.

-Rental agreement/ driving licence/ Voter Id card/ Ration Card/ Passport/ Aadhar card.

-Self-declaration issued by judges of the high court or supreme court.

IRDAI-approved KYC processes:

There are different ways by which you can get your KYC verification process complete. The IRDAI has enabled these processes, and here they are.

1. Online mode

For KYC verification online, all you need to do is visit the KRA portal. On the portal, you will need to provide information such as your name, address, and contact details, along with your Aadhar number. Once you receive an OTP on your registered mobile number, all the documents will be verified. You will then need to upload a self-attested Aadhar copy and accept e-KYC. KYC verification online is also done via biometrics.

2. In-person verification:

In-person verification is also known as paper-based KYC verification. In this, you will need to provide physical copies of all the documents required for verification, such as proof of identity and proof of address. Since the insured is present in person, it is one of the more effective modes of verification. However, it does require you to physically be present to complete the verification, and the documents can be forged easily as well.

3. Offline mode:

The offline KYC verification process might sound similar to paper-based KYC, but it is not. In offline mode, the database is used for verification instead of biometrics. You will need to fill out a KYC form and attach all the relevant documents. You must then submit it to a KRA. Post this; the agency will issue an application number to check the status of KYC verification. Insurance providers can access the documents once KYA uploads them.

4. KYC via Video:

This is one of the more convenient verification processes. In this, there is no need for the insured to be physically present. You will need to submit all the documents online and complete the video verification either via the website or app.

Buying comprehensive insurance provides you access to excellent coverage for your car. It will protect your car against natural calamities, theft, vandalism, burglary, etc. You can opt for add-ons to make the plan sturdier. And a big advantage of comprehensive plans is that you get access to NCB. No claim bonus or NCB is a discount that applies to your policy renewal if you do not claim the policy. The discount can result in considerable savings.

Conclusion

As per the new mandate by the IRDAI, all existing and new policyholders need to get their KYC done. KYC verification online is one of the more convenient ways to complete the process. By doing it online, you can finish KYC compliance within a few minutes. You can use any of the methods mentioned above to complete KYC before buying a new policy.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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