KYC Process In Car Insurance: All You Need To Know

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

What Has Changed With KYC Process?

The newly mandated car insurance KYC is more of a customer-centric approach regulated and mandated by IRDAI. Earlier, there was an option to choose whether to submit the document for KYC or not. However, IRDAI has now made it mandatory to provide the KYC Details. Earlier, it was only required to do the KYC in case of claims of more than 1 lakh rupees.

Also, because the KYC process becoming mandatory, the insurers will have a better chance of eliminating the false claims and receiving customer information in a completely transparent manner.

Benefits Of KYC In Car Insurance

Know Your Customers/ Clients (KYC) is extremely important today for a variety of reasons. It benefits you and your insurer in multiple ways and safeguards you from unwarranted events. Some of the major benefits of KYC are listed below:

1. Strengthens Security Against Identity Fraud: As the name suggests “Know Your Customers” - KYC helps insurance companies to validate your identity and prevents you against any identity fraud. This means no one else can make a claim against your policy since your important identity details will be first validated to check whether or not the claim being made is genuine.

2. Fastens Claim Settlement Process: When your insurer has all your essential identity details - that means accurate and up to date information, it helps in fastening the process of claim settlement. Accurate information cuts down the chances of disputes during claim settlement thereby making the process smooth and hassle free.

3. Complete Record in One Place: Your KYC details also helps the insurer to keep your complete claim/ insurance record in one place to ensure you receive the needed support or assistance in time while renewal, porting or making a claim.

4. Ensures Legal Compliance: As per the Insurance Regulatory and Development Authority of India (IRDAI), it is mandatory for a customer to submit their KYC for legal compliance. There are comprehensive guidelines issued by IRDAI for KYC processes.

5. Helps Insurer Offer Tailored Solutions: Your KYC details also helps the insurer to understand your requirements better, thereby offering you plans as per your needs.

6. Accurate Premium Calculation: Based on the policyholders risk profile insurers check their driving history and personal details through KYC. This helps them in calculating the right premium for the policyholders and maintains transparency and fairness.

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

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

KYC Guidelines For Individual Policyholders

The KYC guidelines for individuals are put in place to ensure that the right individual gets the policy based on the information provided by them and to avoid fraudulent activities or identity theft. Mentioned below are the details on kYC norms for individual policyholders while purchasing a car insurance:

1. Policyholder’s Name: As per the kYC guidelines, the policyholder is required to provide their full name for disclosure as per their identity proof mentioned in a valid document proof like Aadhaar Card, Pan Card or Voter ID Card.

2. Address Proof: The policyholder is required to provide their valid address proof as per mentioned in their Aadhaar card, bank statement or utility/ electricity bills.

3. Proof of Identity: The policyholder is also required to provide a valid identity proof such as their Aadhaar Card, Passport, Voter ID Card or PAN card.

4. Contact Details: The policyholder is also required to provide their original contact details like phone number, email address.

5. Photographs: The policyholder will also be asked to provide their two recent passport sized photographs for the KYC process. In some cases only one is also asked at times. 

6. Other Documents: For KYC process, the policyholders may also be asked to submit additional documents like income proof, proof of occupation etc.

KYC Guidelines for Judicial Persons/ Entities 

There are minor differences between the KYC guidelines for individuals and judicial persons/ entities however, there are additional information that is needed out of judicial persons or entities as listed below for your understanding:

1. Name of The Judicial Person/ Entity: The proper name must be provided of the judicial person or entity.

2. Legal Certificate: Along with submitting the KYC form, a legal certificate has to be provided which proves the judicial person or entity’s judicial authority and status.

3. Address Proof: A valid address proof is also required that can verify the individual or entity’s address.

4. Other Documents: Other documents like your income proof certificate or occupation proof might be asked for the KYC process by the insurer.

Note that irrespective of which car insurance type you choose - third party, stand alone own damage or comprehensive car insurance - you will have to provide KYC details.

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.

Summing It Up!

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.

FAQs

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