What is KYC in Insurance and Why is it Important?

Know Your Customer (KYC) is the process of tracing and verifying the basic credentials of the customers by the financial institutions viz. banks, insurance companies, stockbrokers, etc. KYC is done before or during conducting financial transactions with the customers.

Hence, it is the process by which your identity is checked and verified by financial institutions.

KYC in insurance is very mandatory compliance regulated by the Insurance Regulatory and Development Authority of India (IRDAI). Additionally, the KYC procedure is specified by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) for commercial banks and other financial institutions. These include asset management companies (AMCs), NBFCs and stockbroking firms.
 

Why is KYC Important?

Financial institutions gather vital information related to the identity of a customer through this KYC. The KYC increase procedure is mandatory for ensuring proper legal vigilance to minimize the chances of fraud or money laundering.

What are the Types of KYC?

Know Your Customer (KYC) is a mandatory process that enables financial institutions, including insurance providers, to verify the identity of their customers. The Insurance Regulatory and Development Authority of India (IRDAI) requires KYC compliance to enhance transparency and prevent fraudulent activities.

When purchasing a life insurance policy, individuals can complete their KYC through different methods. Below are the two primary types of KYC used in the insurance sector:

Aadhaar-based KYC (eKYC)

Aadhaar-based KYC, also known as electronic KYC(eKYC), is a digital verification method that allows policyholders to complete their KYC process using Aadhaar details. This method of KYC in insurance is quite a convenient and efficient approach to verifying yourself. Here’s a quick overview of the Aadhaar-based KYC process:

1. The policyholder provides their Aadhaar number to the insurance company.
2. The insurer requests authentication from the Unique Identification Authority of India (UIDAI).
3. Authentication is completed through either an OTP-based verification sent to the Aadhaar-linked mobile number or biometric verification.
4. Once verified, the insurer receives essential KYC details such as name, date of birth, and address, reducing the need for physical document submission.

Once you follow the process and have successfully done the verification, you can enjoy its benefits. However, Aadhaar-based KYC in insurance also has certain limitations. It can only be used for policies that fall within specific regulatory limits. For high-value policies, additional verification through offline KYC is required.

Offline KYC or In-Person Verification

Offline KYC, also known as In-Person Verification (IPV), is a physical verification process. Here, the policyholder submits documents directly to the insurer or an authorised KYC Registration Agency (KRA). This KYC insurance method is generally used for purchasing high-value life policies. Here’s what you need to do to obtain the same:

1. The policyholder visits the insurance provider’s branch or an authorised KRA.
2. Self-attested copies of identity and address proof are submitted.
3. An authorised representative verifies the original documents in person.
4. A photograph and signature verification may be required to complete the process.

Now that you know what steps you must take to get in-person KYC verification done, also remember to take the following documents:

1. Identity Proof Documents: Aadhaar, PAN, passport, voter ID card, or driving licence.
2. Address Proof: Utility bills (electricity or telephone), bank statements, or rental agreements.
3. Additional Documents: Some insurers may request financial documents to assess the applicant’s background, ensuring compliance with KYC insurance guidelines.

Where do you Need KYC?

KYC is compulsory compliance mandated by various regulators such as IRDA, RBI, and SEBI. Moreover, the KYC process also enables the customers to access various premium financial products. Here are some of the services where you require KYC:

• KYC for Banks -  Banks conduct KYC and update customer KYC regularly, based on their perception of risk.
• Hence, customer KYC is a primary step while carrying out transactions like opening bank accounts, investing in fixed deposits or recurring deposits, various types of mutual funds, and other online investments.
• KYC for Insurance -  KYC for insurance companies is equally important as it is for banks. It is necessary to ensure the authenticity of the investments and the insurance policy purchased.

It ensures that the insurance coverage is received by the family of the real policyholder. KYC also ensures proper tax compliance on investment, thereby eliminating chances of black money.

Especially, if you are buying a ULIP, the KYC procedure is the first process you have to undergo. All the life insurance and mutual fund investors are required to adhere to the KYC Registration Agency (KRA) as per the guidelines laid by the IRDAI and SEBI.

What is EIA (e-Insurance Account)?

Electronic Insurance Account or EIA is the digital account of the policyholders that gives them access to their life insurance portfolio with a click of a mouse.

Every EIA has a unique EIA Account number, and every account holder is given a unique Login ID and Password. With these login credentials, they can access his policies online.

Benefits of EIA
 

1. It does not require manual access to policy documents
2. You can manage all your life insurance policies in your single account
3. If you have made any changes to your contact details in the insurance repository, it will get auto-populated in all your policies across all life insurance companies
4. Opening and operating EIA is free of cost
5. You can assign admins to manage your policies and claims after your demise
6. Claim filing becomes an easy and simple process with a single-window submission
    

Documents for Opening EIA

The following documents are required to be submitted to the office of the Insurance Repository for the opening of the EIA:

1. PAN or UID card
2. Address proof
3. DOB proof
4. Canceled cheque

Canara HSBC Life Insurance offers ease of opening EIA. You are just required to submit the above-mentioned documents to any of their branch offices. Thereafter, they will further process your application for EIA and will open your Electronic Insurance Account.

In case you have already opened an e-Insurance Account, and you want to buy a new insurance policy in electronic form, all you need to do is mention your unique EIA number in your insurance proposal form. Your new insurance policies will be issued in electronic format.

Conclusion

Completing KYC in insurance is essential for ensuring security, transparency, and regulatory compliance. Whether opting for eKYC or offline verification, policyholders must provide accurate details to avoid complications. With Canara HSBC Life Insurance, you can seamlessly complete your KYC process and manage policies effortlessly through an Electronic Insurance Account. 

Secure your future today with a trusted insurance partner!