IRDAI regulations for KYC in auto insurance

The Insurance Regulatory and Development Authority of India (IRDAI) has made the Know Your Customer (KYC) process mandatory for all motor insurance sectors, including car insurance beginning 1 January 2023. Digital KYC, Video KYC, Aadhaar-based KYC and Central KYC (CKYC) are accepted forms of verifying the customer's identity. Read on as we break down the IRDAI's notification and share how you can submit the KYC document for your auto insurance.

What is KYC?

KYC is a process of confirming the customer’s identity when opening a digital account. It involves collecting and verifying personal information such as name, address, and identification documents. 

KYC is mandatory for all insurance policies in India, including car insurance. The IRDAI guidelines aim to strengthen the KYC norms in the car insurance industry and prevent fraudulent activities.

Understanding KYC norms in auto insurance

The regulation of making KYC mandatory for all customers while purchasing a new insurance policy is to detect and reduce the impact of insurance-related crimes such as money laundering.

The IRDAI has laid out separate KYC guidelines for individuals and judicial persons that every insurer must adhere to while performing the KYC process. Hence, all policies purchased from 1 January 2023 must go through the process of KYC norms.

KYC guidelines for individual policyholders

Here are the KYC norms for individual policyholders.

• Insurers must make all efforts to verify and authenticate the customer’s identity.

• Insurers must take special care to ensure that a policy is not under an anonymous or fictitious name.

• Insurers must ensure special procedures exist to identify new and existing customers.

• Insurance companies must verify a customer's identity, address and recent photograph.

• Insurers must ask for ‘self-declaration’ when a customer wants to submit a different address from what is mentioned on their Aadhaar card.

• Insurers can ask for Officially Valid Documents (OVD) from customers who cannot authenticate their Aadhaar due to injury, illness, age, or otherwise.

KYC guidelines for judicial persons/entity

Here are the KYC norms for a judicial entity or person.

• Insurers must ensure they take all measures to establish the client’s identity and its beneficial owner.

• Insurers must verify their legal status through the documents listed below.

  • Name, proof of the existence and legal form of the entity or person.

  • Address of the entity or person’s registered office.

  • Authorised persons who claim to be personally responsible for such clients and their beneficial owners.

KYC accepted by the IRDAI

Here are the various ways you can submit KYC for insurance policies.

• Online Aadhaar-based KYC authentication: This process involves using Aadhaar for KYC purposes. You can provide your Aadhaar number and biometric authentication to complete the KYC process.

• Offline-based KYC authentication: This process involves using physical documents for KYC purposes. You can provide copies of your identity proof and address proof with the KYC application form.

• Video-based identity authentication: This process involves providing your KYC details through a video call to the insurance company.

• Permanent Account Number (PAN)-based KYC authentication: This process involves providing your PAN to authenticate your identity. You have to submit a self-attested copy of your PAN. You must also submit address proof documents such as voter ID, passport, utility bills, etc.

• OTP-based e-KYC: This process involves using the One Time Password (OTP) sent to your registered mobile number. You must enter the OTP in the e-KYC form to authenticate your identity.

Documents required for KYC of individual customers

Here is the list of accepted documents to complete the KYC process for insurance policies.

• Identity proof: Voter ID, Aadhaar card, passport, utility bills, etc.

• Address proof: Bank statement, utility bill, rental agreement, etc.

• Photograph: Recent passport-size photograph

• Other documents: As required by the insurer

Impact of the new IRDAI regulations for KYC in auto insurance on policyholders and insurers

Here are the benefits of the IRDAI regulations for KYC in vehicle insurance.

• Faster claims settlement since insurers do not need to ask for KYC when a policyholder raises a claim.

• Insurance companies can identify individuals better and control frauds such as money laundering.

• Insurers can assess and manage risk better, enabling them to set appropriate premiums and assess the likelihood of registering a claim.

• It will enable insurers to improve customer satisfaction and attract new customers.

Frequently Asked Questions (FAQs)

Here are the answers to some common questions about KYC for vehicle insurance.

Why do I need to complete KYC for my motor insurance?

Completing KYC is a regulatory requirement, and it's also important for your own security. By verifying your identity and address, insurers can help protect you from fraud and identity theft.

Can I complete KYC online for my vehicle insurance?

Yes. Many insurers now offer online KYC verification, which can be more convenient than visiting a branch in person. To complete KYC online, you'll typically need to upload scanned copies of your ID and address proof documents.

Do I need to complete KYC every time I renew my auto insurance policy?

No. Once you've completed KYC for your initial policy purchase, you won't usually need to repeat the process for future renewals (unless there's been a significant change in your personal information).

What happens if I don't complete KYC for my vehicle insurance?

If you don't complete KYC, your insurer may not be able to issue your policy or process your claim. It's important to complete KYC as soon as possible to avoid any delays or complications associated with insurance-related processes.

Which is better? Third-party Insurance or Comprehensive Insurance?

For wide-ranging benefits, choose Comprehensive Insurance since it covers third-party liabilities and damage to your vehicle caused due to accidents, man-made and natural calamities. It also covers theft.

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.