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Why and How Do Car Insurance Background Checks Happen in India?

Updated On Oct 17, 2023

Why and How Do Car Insurance Background Checks Happen in India?


Vehicle insurance in general helps act as a financial shield in unforeseen circumstances. Key events that tend to be covered include accidents, thefts, damage to a third party, and even destruction of the vehicle. Although the coverage is entirely dependent on the policy you opt for, there is no denying that insurance is a helpful tool. Not only is it mandatory to have one by law, but it is also recommended to have one, keeping in mind future uncertainties.

Why and How Do Car Insurance Background Checks Happen in India?

Providing Insurance is good for Providers too. So Why the Background Checks? 

Although providing insurance tends to be profitable to the firms providing them, certain checks and balances are put in place. Providing insurance is essentially providing financial aid to the policyholder due to the occurrence of certain events. Hence, it is important that the firms do a check on their customers. Key reasons to do so are as follows: 

1. The Possibility of Fraud or Cheating by the Policyholder

Insurance providers tend to be vulnerable to acts of cheating and fraud. That is, it falls on them to get to know everything there is about you, as a customer, before providing you with a plan of your choice. Hence these firms tend to perform routine background checks on potential customers. An extended application of doing so includes improved customer service. 

2. Verification of Customer Information 

Background checks are an important way for providers to ascertain if you are who you say you are. This is done with the intent to ensure that the coverage is being given to the correct individual. Additionally, a background check on customers helps avoid the allocation of a policy to identity theft victims.

3. Accurate Determination of Premium Amount to be Paid

Premiums charged to the customer may vary based on their past records. In case a customer has a high frequency of claiming insurance, firms may charge a higher premium in comparison to customers with a lower frequency. A higher frequency of claiming insurance is seen in a negative light.

What kind of information do Policy Providers Look Into?

  • Information About Your Identity

Personal information collected by the insurance firms is verified. Similar to any financial institutes, insurance providers adhere to KYC norms, helping them detect identity theft and prevent fraud

  • Credit Score

A person’s record of past credit is a good indicator of their financial health and stability. Hence, credit-score data provided by credit rating agencies are also looked into.

  • Past Records

It is important for providers to ensure that the customer they engage with does not have a criminal history. Hence, past records and background checks help avoid insurers to get into unwanted situations.

  • Driving History

Similar to the previous point, if you are applying for car insurance, it would make sense to check records of your past driving habits and history.

  • Vehicle Details

Given that you are looking to insure your vehicle, insurers would naturally be interested in the current condition of the vehicle. This allows them to access the probability of the policyholder claiming. Additionally, it allows them to take stock of the current condition of the vehicle.

Also read: Steps To Follow After A Car Accident

All You Need to Know About Car Insurance


This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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