KYC Process In Car Insurance

KYC or Know Your Customer is now mandatory from 01 January 2023 for all types of insurance, including car insurance plans. Insurance Regulatory and Developmental Authority has instructed all the insurers to start with the KYC process. The implementation of KYC happened in order to make the insurance process more convenient as well as reduce the fraud claims associated with insurance. While KYC is mandatory for all types of insurance, in the section below, we have enlisted the KYC process for car insurance.

What is KYC in Car Insurance?

Financial institutions, particularly insurance businesses, employ the standardised Know Your Customer (KYC) process to confirm the identity of their clients. When it comes to auto insurance, KYC is essential for protecting against fraud and verifying that the policyholder is who they say they are.

KYC in car insurance involves providing certain personal and identification details, which helps the insurance provider have a clear understanding of the customer's profile. This process is not only mandatory but is also beneficial for the policyholders, streamlining claim settlements and other transactions related to the insurance policy.

Features of KYC Norms in Car Insurance

Listed below are the features of Know Your Customer norms in car insurance:

• To complete KYC norms in car insurance, you need to submit documents like an Aadhar card, photograph, identity proof, etc
• For new buyers of car insurance plans, they need to submit KYC documents at the time of buying the car insurance plan
• For existing car insurance renewal policyholders, insurers are requested to start collecting the KYC documents within 1 year

Benefits of KYC in Car Insurance

Some of the benefits of KYC in car insurance are as follows:

• KYC in car insurance will enable the insurers to keep the complete record of policyholders in one place
• KYC will help in reducing the chances of fraud claims
• With KYC greater customer satisfaction is also ensured 

IRDAI Approved KYC Process

IRDAI has approved different KYC procedures such as the following:

• Aadhar based KYC which allows policyholders to do the KYC either online or offline
• Digital KYC 
• Video-based identification where the insurer and policyholder will interact and complete the KYC process
• By submitting the Form 60 along with your PAN card and other official documents

Documents Required for KYC Process in Car Insurance

Listed below are the essential documents required for KYC in car insurance:

• Passport
• Driving License
• Aadhar card
• PAN card
• Voter’s Identity Card
• Passport size photograph

KYC Guidelines for Individual Policyholders

For individual policyholders, the KYC process in car insurance is fairly straightforward. Below are the standard KYC guidelines that individuals need to follow when purchasing car insurance in India:

1. Proof of Identity (PoI): Individuals need to submit a government-issued identity proof. This can be Aadhar Card, PAN Card, Voter ID, Passport, or Driving Licence.
2. Proof of Address (PoA): A valid proof of address is mandatory. This can include utility bills (not older than three months), Passport, Aadhar Card, or Voter ID. If the person has recently moved, then rental agreement along with a utility bill in the name of the property owner can be used.
3. Photograph: A recent passport-sized photograph is required.
4. Application Form: A duly filled application form with accurate details is to be submitted. Any discrepancies in the information can lead to issues later, especially during claim settlement.
5. PAN Card: Submitting a PAN card is mandatory as it helps in tax verification. In case the policyholder does not have a PAN card, Form 60 can be submitted.

It is important to remember that everyone wishing to get auto insurance must go through the KYC procedure; the insurance application process cannot proceed without the submission of the necessary KYC documentation. The KYC documents must be submitted when the insurance is first issued, and they could also be asked for when the policy is being renewed.

Adhering to KYC guidelines ensures a smoother relationship with your insurance provider, facilitating smoother claim processes and maintaining the validity of your car insurance policy. The KYC process aids in creating a transparent and secure insurance environment for both insurers and policyholders.

KYC Guidelines for Judicial Persons/Entity

For entities other than individuals, such as companies, partnership firms, or trusts looking to secure car insurance, the KYC process is slightly more comprehensive. The requirement is not just to understand the entity but also the individuals who are acting on its behalf. Below are the KYC guidelines applicable:

1. Entity Proof: The company or firm should provide its registration certificate, license, or any other valid document that serves as proof of its legal status and existence.
2. PAN Card: A PAN card of the entity is a mandatory requirement. For companies, the PAN card should be in the name of the company, while for trusts and partnerships, the PAN should be in the name of the trust or partnership firm.
3. Proof of Address: The registered office’s address needs to be verified, and relevant documents like utility bills, rent agreements, or ownership proof should be submitted.
4. Board Resolution: In the case of companies, a Board Resolution that authorizes a person to act on behalf of the company should be submitted. This document should also clarify the purpose of purchasing the insurance policy.
5. Identity & Address Proof of Authorized Signatories: The persons who are authorized to deal on behalf of the entity should provide their identity and address proof. This can be an Aadhar Card, Voter ID, Passport, or Driving License.
6. List of Partners/ Directors: Partnership firms and companies should submit a list of partners or directors respectively, along with their addresses.
7. Contact Details: An active email address and contact number, preferably of the authorised person or the entity, should be provided for seamless communication.
8. Photographs: Passport-sized photographs of the authorized signatories are also required.

Importance of Compliance with KYC Guidelines

The KYC process is designed to protect both the policyholder and the insurer from fraudulent activities and financial misuse. Ensuring accurate and honest submission of all required KYC documents will facilitate a hassle-free experience when dealing with your insurance provider, be it at the time of purchasing the policy, renewal, or claim settlement.

Take Away

Thus, KYC has now become a mandatory requirement for all policyholders so that the number of insurance-related frauds is reduced. So, in case you already have an insurance policy, make sure to contact your insurer and get your car insurance KYC done at the earliest.

FAQ's

1. What does KYC mean for auto insurance?

In auto insurance, KYC, or Know Your Customer, refers to the process of confirming the policyholder's identification. Various documentation attesting to the identity, address, and legal standing of the person or organisation buying the insurance must be submitted as part of the process.

2. Which documents are normally needed for each policyholder's KYC?

Identity verification (Aadhar card, PAN card, voter ID, or passport) and address verification (utility bill, bank account, or rental agreement) are typically needed for KYC for individuals.

3. Are there any differences in the KYC procedures for trusts or organisations buying auto insurance?

Indeed, additional documentation is required for entities such as businesses or trusts. Examples of these documents are registration certificates, PAN cards, proof of address for the registered office, board resolutions (in the case of companies), and identification documents for authorised signatories.

4. How frequently should I update my KYC data with my auto insurance company?

If your address or personal information changes, or if the insurance company requires additional documentation, you might need to update your KYC information.

5. If the KYC documents I provide are incorrect, can my insurance application be denied?

Absolutely, if your KYC documents are erroneous, lacking, or if the insurance company suspects fraudulent conduct, they have the right to refuse your application.

6. Is KYC necessary in order to renew auto insurance?

Although KYC is required for new policies, you might not need to resubmit KYC documents for renewals unless the insurer requests them or there is a change in your information.

7. Is KYC required in order to purchase third-party auto insurance?

Yes, regardless of the kind of auto insurance coverage being purchased—including third-party auto insurance—KYC is necessary.

8. What happens if, after acquiring my policy, I don't follow the KYC requirements?

Depending on the situation and the insurance company's regulations, noncompliance with KYC standards may result in policy termination, denial of claim settlements, or legal action.

9. I want to buy auto insurance. Can I finish the KYC process online?

Yes, a lot of insurers let clients finish the KYC procedure online by sending in scanned copies or photos of the necessary paperwork. Make sure the paperwork is readable and clear enough for verification.

10. What is the meaning of KYC relation? 

The term "KYC relation", "Know Your Customer" or "KYC" is used in the context of banking, financial services, and customer identification. KYC is a process used to identify customers in financial institutions and businesses. The objective of KYC is to verify that businesses engage in transactions with individuals or entities who are genuine and authorized, all while deterring activities such as money laundering, fraud, and other unlawful practices.

 11. What is KYC relations in insurance policy?

The insurance watchdog Insurance Regulatory and Development Authority of India (IRDAI), has recently announced that starting January 1, 2023, Know Your Customer (KYC) documents will be required for all new health, motor, travel, and home insurance policies.

Also read: Reasons for Car Accident in India