New insurance rules: IRDAI makes KYC mandatory from January 1; check details
Reported By:| Edited By: Raunak Jain |Source: DNA Web Desk |Updated: Dec 29, 2022, 06:54 PM IST
India’s Insurance Regulatory and Development Authority of India (IRDAI) has announced that Know Your Customer (KYC) documents will be mandatory for all new health, motor, travel, and home insurance policies purchased from 1 January 2023. This rule will apply to all types of insurance, including life, general and health insurance. Currently, KYC documents are only required when making a claim on a health insurance policy worth over INR1 lakh. The new rule will require customers to provide KYC documents when purchasing a new policy, rather than waiting until a claim is made.
For existing policyholders, the IRDAI has given insurance companies a specified time frame within which to collect KYC documents. This time frame is two years for low-risk policyholders and one year for other customers, including high-risk customers. Insurers will inform customers via SMS or email when it is time to submit their KYC details. Currently, it is not mandatory for existing policyholders to provide KYC documents when renewing their policy. However, if a policy is due for renewal after 1 January 2023, policyholders may be required to provide photo identification and proof of address to their insurer to become KYC compliant.
The new rule is expected to lead to faster claim settlement, as insurers will have a more detailed profile of their customers through KYC documents. This will help to prevent fraudulent claims and ensure that payments are made to the legal heirs of policyholders. It will also enable insurers to maintain a centralised database of policy records, which will be useful for all stakeholders in the insurance value chain.
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Providing KYC documents is currently a voluntary choice for customers when purchasing a new general insurance product. The new rule will make it mandatory for insurers to collect KYC documents from all customers purchasing a new non-life insurance policy, regardless of the premium amount. Policyholders who have not yet provided their KYC details to their insurer should contact the company and provide the necessary information as soon as possible. If they are unable to provide KYC documents, they may be unable to purchase or renew their insurance policy.
KYC documents may include photo identification and proof of address, such as a passport, driving licence or utility bill. Policyholders are currently required to provide a PAN card or Form 60 if the aggregate insurance premium is INR 50 thousand or more in a financial year. The IRDAI has further stated that for existing policyholders with insurance policies of not more than an aggregate premium of INR 50 thousand in a financial year, PAN/Form 60 must be obtained by a date to be determined by the Central Government.