Why are KYC Norms Important in Home Insurance?

Posted on: Apr 26, 2023 | 3 mins | Written by: HDFC ERGO Team

Why are KYC Norms Important in Home Insurance?

Know Your Customer (KYC) norms have become the cornerstone of customer identification and verification for most financial institutions today. In relation to KYC in insurance, establishing these norms allows insurers to verify the identity of an individual seeking a policy. The implementation of KYC in insurance helps in getting complete information about customers as well as helping companies detect any irregularities or attempts at fraudulently acquiring a policy.

Through this process, data like name, address proof, and age are collected, which helps to authenticate that the information provided is accurate and legitimate before selling a policy. This information helps insurers determine if they should offer certain policies to specific individuals based on their risk profile, thus eliminating risks associated with frauds stemming from fake identities and money laundering activities.

Understanding KYC Norms in Home Insurance

It is essential to understand the importance of KYC in insurance norms when dealing with home insurance providers. KYC is a regulatory process that ensures, among other things, that individuals and businesses buying home insurance are who they say they are. KYC in insurance requires customers to provide valid identification documents and address documents.

Home insurers must comply with these standards in order to protect their customers from any fraud and/or money laundering activities that can put them at risk for significant losses. In addition, knowing one’s customer helps improve the overall customer experience when it comes to finding the right policy that meets individual needs by providing the correct information about identity, residence status, and creditworthiness. Finally, understanding KYC in insurance gives companies a better sense of customer loyalty.

KYC Norms for Individuals

KYC in insurance consists of collecting identity details such as name, address, age, and a passport-size photograph, along with other documents, if any. With IRDAI making it mandatory for all insurers in India to comply with insurance KYC norms, individuals have seen a shift towards digital or online modes of verification where they can submit their photos and other relevant documents electronically. The following are the important KYC norms for individuals:

1. Insurance companies need to take every possible measure to ascertain the true identity of the client buying home insurance.

2. Effective identification of new/existing clients rightly is important

3. It is important for insurers to ensure that the property insurance contract is not under an unidentified name.

4. For existing customers, insurance companies are required to match the previous KYC records with the current records. Additional documents are required to be collected in case of any changes.

5. If the address for communication is different from the Aadhaar address, self-declaration from the home insurance buyer is required.

KYC Norms for Judicial Entity/Persons

The insurance companies need to follow below KYC norms for Judicial entities/persons:

1. Measures to be undertaken by the insurance companies to identify the judicial entity and its beneficial owner

2. Insurance companies are required to verify the legal status of the judicial entity/person with documents like proof of existence, address proof of the judicial person/entity, and the documents of its beneficial owners to ascertain their true identity.

KYC Procedures Accepted by IRDAI

Insurance companies can follow any of the below insurance KYC procedures for home insurance buyers.

1. Aadhar-based KYC: This can be done based on online authentication or offline authentication based on the convenience of the home insurance buyers.

2. Video-based identification process: This is an online process that is done via in-person video verification.

3. Digital KYC: This needs to be done as per the guidelines of the Prevention of Money Laundering Act (PMLA)

4. KYC identifier: This can be done either offline or online based on the KYC identifier, a unique number issued to the insurance buyer by the Central KYC Records Registry.

5. OVD method: Insurers can use officially valid documents along with PAN card/Form 60 to establish the true identity of the client.

Documents Required for KYC

The following are the documents required for KYC verification while buying home insurance:

1. Proof of identity: PAN card/Passport/Voter’s ID/Driver’s license/ NREGA card/any Government-issued identity document

2. Proof of address: Aadhaar card/Passport/Voter’s ID/Driver’s license/Latest utility bill, etc.

3. Passport-sized photograph.

In certain cases, insurance companies may ask for additional documents. Hence, it is important to check with the insurance company on the list of documents while buying home insurance.

Conclusion

Home insurance is an important form of protection for families and their property. Homeowners should always keep in mind the importance of fulfilling KYC Norms when taking out a home insurance policy. Doing so ensures that the policy covers the required amount according to the homeowner’s requirements while also keeping fraud at bay. In addition to this, it helps ensure that all claims are valid, as circumstances can change over time which could affect whether or not a claim is accepted by your insurer. Ultimately, ensuring compliance with KYC norms will help guarantee you peace of mind knowing that your home and its contents are adequately insured according to your needs.

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

Ways To Save Money On Home Insurance As Rates Rise

Explaining the Difference Between Inclusions and Exclusions in Home Insurance Terms

How Credit Score Affects Home Insurance Premium?

SUnderstanding Land Grab and How to Prevent It?