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Insurance sector pushes for mandatory KYC, claims bureau

Anybody can get a motor insurance policy without a KYC document at a time when a customer needs to provide KYC even for buying 100 units of a mutual fund or while applying for a credit card.

IRDAI asks insurers to pay up in suicide cases within 12 months The insurance sector currently gets the KYC only during the time of claims.

Insurance companies have sought mandatory KYC (know your customer) requirement for customers and a claims bureau in the sector to build profiles of customers and claims history that, they claim, will bring in a sustainable business and prove beneficial to all stakeholders in the long run.

“We have already asked the regulator Insurance Regulatory and Development Authority (IRDA) about making KYC mandatory. We need a claims bureau on the lines of Cibil to access the records of the customer. This is not available right now,” said an industry spokesperson. A mandatory KYC will help insurers to store data of customers in a credit bureau which will provide the track record of the insured person just as the banks get the credit history of a customer from credit information bureaus like Transunion Cibil, another insurance official said on the sidelines of the CII Insurance summit.

The insurance sector currently gets the KYC only during the time of claims. Anybody can get a motor insurance policy without a KYC document at a time when a customer needs to provide KYC even for buying 100 units of a mutual fund or while applying for a credit card. “Here when you apply for a motor insurance by paying a premium of Rs 30,000 in a year, no KYC is required. We are not able to underwrite the customer… we underwrite the asset today,” said Roopam Asthana, CEO, Liberty General Insurance.

Explained

To provide track record of an insured individual

Making KYC (know your customer) mandatory will help insurers store data of customers in a credit bureau, which will provide the track record of the insured person just as the banks get the credit history of a customer from credit information bureaus like Transunion Cibil. The insurance sector currently gets the KYC only during the time of claims.

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According to Asthana, the insurance sector doesn’t have access to a database like Cibil in the absence of KYC in the segment. “We are the only part of the financial sector where KYC is not required. That’s (KYC) the foundational step in creating a very sustainable business. The moment you are submitting a KYC, your are creating a profile. We want to bring in a claims bureau. That will give the claims history. When I go to an insurance company for a policy, they should be able to put my ID and pull out my claims history. I can then price (the policy) accordingly,” Asthana said.

“What’s happening today is that even good drivers are getting priced highly. When we go to Cibil, it says they need some identifier. In Cibil, you need a PAN or Aadhaar as identifier. Aadhaar is now the basis. Let that be the KYC identifier for the insurance sector. The difficult part is getting the Aadhaar from the customer,” he said. While the IRDAI is receptive to the idea, it may have to get legal clarity on the issue. Last year, IRDAI had asked insurers to refrain from seeking Aadhaar from the proposer or policy holders. It also said insurers should not mandatorily seek PAN/ Form 60 as part of KYC norms. This directive came soon after Supreme Court in September 2018 ruled against mandatory use of Aadhaar in matter pertaining to the prevention of money laundering, among others.

Insurers were then allowed to accept Aadhaar card as one of the identity or address proof documents for KYC purpose subject to certain conditions. They include voluntary offer of Aadhaar card, including physical copy of e-Aadhaar, masked Aadhaar and offline Aadhaar, by customer as one of the documents for KYC purpose. The insurers will under no circumstances do the authentication either using e-KYC facility or authentication facility of UIDAI. They should also ensure that the first eight digits of the Aadhaar number are properly masked, according to the IRDAI circular.

First published on: 24-08-2019 at 01:38:38 am
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