The New IRDAI Regulations for KYC in Car Insurance

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As per the IRDAI guidelines, all motor insurance sectors including car insurance will have to follow KYC (Know Your Customer) procedures, beginning from 1st January 2023. IRDAI mandates Digital KYC, Aadhaar-based KYC, CKYC and Video KYC as accepted forms of performing this procedure.

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      Understanding the KYC Norms

      With an increase in insurance-related frauds such as money laundering, all car insurance companies will have to compulsorily perform KYC (Know Your Customer) checks on every policyholder.

      The IRDAI has laid separate KYC norms for individuals and judicial persons that every insurer must follow while performing KYC procedures. These norms are:

      KYC Norms for Individuals

      • Insurance Companies should make every possible effort to determine the true identity of the customers
      • In order to ensure that any contract is not under a fictitious or anonymous name, insurers should take special care.
      • The insurer should exercise effective procedures to identify new and existing customers properly.
      • For proper identification, identity proof, address proof and a recent photograph are compulsory.
      • For existing customers, an insurer will perform the necessary KYC based on the adequacy of the previously obtained data
      • Self-declaration is when the individual wants to submit an address which differs from their Aadhaar address.
      • Official documents of individuals who cannot go through verification due to age, injury, illness, or otherwise.

      KYC Norms for Judicial Entity/Persons

      • In the case of judicial persons/entities, insurers should take all reasonable measures to identify the client and its beneficial owner.
      • Insurers will also have to identify and verify their legal status via various documents to support details like:
        • Name, legal form and proof of the existence of the entity
        • Powers that regulate the particular client
        • Address of the registered office of the entity/person
        • Authorised individuals who are claiming to act on behalf of such clients and their beneficial owners.

      KYC Procedures Accepted by IRDAI

      IRDAI has mandated the following KYC methods for the insurer. A car insurance company can perform any of the following KYC procedures:

      • Aadhaar-Based KYC: This KYC procedure can be performed both through online and offline verification.
      • Digital KYC: as per Prevention of Money Laundering rules.
      • Video-Based Identification: Electronic process of identification in a paperless form.
      • By KYC Identifier: A unique number allotted to the client by Central KYC Records Registry.
      • OVD: By using documents that are officially valid and
      • PAN card or Form 60 (whichever is applicable) along with any other documents needed by the insurer.

      Documents Required for KYC of Individuals

      Following are the officially valid documents required for the KYC of the individuals:

      • Passport
      • Driving License
      • Aadhaar Card
      • NREGA Card duly signed by an officer of the State Government
      • PAN Card
      • A letter issued by the National Population Register containing details of name and address.
      • Voter's Identity Card

      Wrapping Up!

      These guidelines by IRDAI have been introduced as “Master Guidelines” with an aim to curb money laundering and terrorist financing in the insurance business. These guidelines will be applicable for all insurance sectors except re-insurance business performed by the Indian Insurance company or foreign companies in India.

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      *Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB. Actual time for transaction may vary subject to additional data requirements and operational processes.

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