Team AckoJun 27, 2022
Car insurance is a financial product. It works on a basic principle that you get paid if you face a certain predetermined situation as per policy terms. It could be car damage, injuries, or property damage as per the plan you select.
Since the insurance company will bear your financial loss related to the car, they need to be certain that all the information you share is authentic. This is where a car insurance background check comes into the picture. Let’s take a look at the ‘why’ and ‘how’ part of the background check for car insurance in India.
It is necessary to carry a thorough background check for the insurer before issuing the policy or for claim settlement due to rising cases of fraud.
There have been instances where people create fake user profiles to get car insurance and then raise a claim. Such claims are often dubious and no injury or damage is actually suffered by the customer.
The amount of false information shared with the insurer can vary. For example, sometimes, a car owner would include old damage while claiming for a recent accident. This is not allowed. You can only claim for damages related to one event. This is a type of fraud on a small scale.
There are incidents where people create a situation of car theft and claim for the total value of the car. This is an example of serious car insurance fraud. Here, not only will the car insurance company blacklist you, but serious legal action can also be involved.
Thus, claim investigations and background checks are a crucial part of any car insurance plan.
Here is a list of reasons why insurers run a car insurance background check.
The regulator, Insurance Regulator and Development Authority of India (IRDAI), mandates car insurance companies to comply with Know Your Customer (KYC) and anti-money-laundering regulations. This must be a part of completing a car insurance sale.
Sometimes fraudsters can use the identity of unsuspecting car owners to buy car insurance policies. Then they raise fake claims, and the unaware car owner is hassled with the claim process. Thus, it is necessary to confirm that there is no type of identity theft involved.
In recent times, motor insurance has gone through some fundamental changes where customised products are introduced. To create such a plan that is specific to the customer, an insurance company must get access to customer information. Here a detailed background check provides the required data.
Background checks are also conducted for Third-party Car Insurance claims. In these types of claims, a third party can approach the insurer and raise claims against their customer's policy. Since there is no KYC involved in this case, conducting a background check becomes imperative to avoid fraudulent claims.
There are some factors based on which insurers conduct background checks for the car owners. Here is the list for your reference.
Basic information of the car owner is sought here, for example, name, ID proof, residential proof, etc. Additionally, car details like manufacturing year, make and model, registration details, etc.
In the case of car insurance renewal, insurance companies will ask for policy details like policy number, claim details, type of policy, etc.
Some insurance companies also ask for driving records and criminal records of the customer. But these verifications require approvals from the customer and the insurer must provide valid reasons for the same. Usually, a car insurance company will ask for this type of information in case of major claims. For example, theft claims, customers with a fraudulent claims history, etc.
The basic idea behind car insurance is to get a financial backup in case of car damage or injuries (based on the coverage you opt for). Since money is involved, the insurer will make sure that the right person gets the required amount as per the policy terms. Thus, car insurance background checks are important.
This depends upon the car insurance company and the rules they follow. If the insurer chooses to verify criminal records and accept or deny car insurance coverage based on these records, then they can do so.
Yes, car insurance can be cancelled by providing a valid reason. But you need to buy a policy from another insurance company to get continued coverage. Else, you will be exposed to legal and financial liabilities.
Usually no, but this again depends upon the terms and conditions of the insurance company.
|Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.|
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