New Insurance Rules: KYC is Mandatory

It is now mandatory to submit Know Your Customer (KYC) documents for purchasing all new insurance policies, including health, auto, travel, and home. From January 1, 2023, the rule is applicable to every type of insurance scheme, such as life, health, and general insurance. 

This is as per the mandate of the Insurance Regulator and Development Authority of India (IRDAI).

Earlier, it was voluntary for an individual to share KYC documents on purchasing a policy. However, the insurers will have to ensure now that they collect KYC documents from customers. The new rule has resulted in shifting the KYC requirements from at the time of claim to at the time of new policy purchase.

Existing policyholders need to contact the insurer and submit the relevant details. In case of non-compliance, a customer won’t be able to purchase or renew the insurance policy. 

The KYC documents to be submitted include photo IDs and proof of address (PoA) such as an Aadhaar card, passport, voter ID card, driving licence, NREGA job card signed by a state government officer, and letter by National Population Register consisting of demographic details and any other document notified by the central government after consulting the IRDAI.

Currently, policyholders are required to submit a permanent account number (PAN) card if the aggregate insurance premium is Rs 50,000 or more in a particular financial year. In the case of existing policyholders with insurance not exceeding an aggregate premium of Rs 50,000 in a financial year, PAN or Form 60 must be obtained by a date that will be determined by the government, as per the IRDAI rules.

The move would ensure a more seamless and faster claim process considering that a more detailed profile of customers is readily available with insurers.

The risks of fraudulent claims could be countered as insurance companies can look forward to improving the accuracy of risk management and pricing with the KYC details.

It will also help maintain a centralised database of policy records, which would be a win-win for all stakeholders.

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