KYC or Know Your Customer was a process that was primarily involved when handling bank transactions. It primarily dealt with customer identification and was introduced to cut down on financial crimes. This process is now being brought into the general insurance sector, specifically for travel insurance, for the same reason.
Starting January 1st, 2023, the Insurance Regulatory and Development Authority of India (IRDAI) has stated that providing KYC details when purchasing or renewing all insurance plans will be mandatory. This rule applies when purchasing or renewing travel insurance as well. This move was based on the guidelines issued on August 2022 and applies to all travel insurance plans regardless of their premiums.
What Is KYC In A Travel Insurance Policy?
KYC is a means to verify the authenticity of the policyholder. It involves submitting a few key documents to the insurer during policy renewal or purchase so the insurer can correctly identify their clients.
With the introduction of KYC in trip protection insurance, which is essentially travel insurance, there is now the added advantage of extra security when it comes to insurance policies. In addition, since most insurance companies provide an online process to upload KYC documents, policyholders can now enjoy faster processing times and easier claims settlement processes. This is because the insurer already has access to all the necessary KYC documents provided at the time of renewal or purchase.
It also helps prevent fraud and ensures that the insurance policy and reimbursement costs are issued to the right person. You should note that KYC is required for both domestic and travel international insurance policies from all insurance providers.
KYC Requirements For Travel Insurance Based On IRDAI Guidelines
These are the different ways insurers can introduce a KYC check for their travel insurance clients, according to the IRDAI’s guidelines.
- Aadhar-Based KYC: As the name suggests, the insurer will use your Aadhar ID to verify your identity. This can be done either online or in person.
- KYC Identifier: The insurer identifies you using a unique PIN issued by the Central KYC Registry (CKYCR).
- Digital KYC: This can be conducted online by the insurer according to the Prevention of Money Laundering (PML) Rules.
- Officially Valid Documents (OVDs): This can be done by providing your officially valid documents to the insurer.
- Video-Based KYC Identification: This is consent-based verification of the customer’s identity. It means the insurer can verify your identity and given information through consent-based video calls.
- PAN Card Or Form 60: Like the Aadhar-based verification, insurers can use your PAN card to verify your identity. Or you can also provide Form 60, depending on the application requirements. Form 60 of the Income Tax Rules can be found here.
KYC Documents Required To Purchase A Travel Insurance Plan
The specific documents required will depend on your insurance provider. However, they will fall under three categories:
- Identity Proof
- Address Proof
- Income Proof
Here are some standard documents most insurance providers will ask when you purchase or renew your travel insurance plan:
- Voter ID card.
- Ration card with your address and photo ID.
- Aadhar card.
- A valid passport.
- NREGA job card signed by a state government officer.
- Any recent utility bills (water, gas, electricity, etc.) that state your residential address.
- A letter from the national population registrar including your demographic information.
IRDAI KYC Rules Travel Insurance Providers Need To Follow
The IRDAI has issued essential rules regarding the issuance to travel insurance plans that need to be followed by travel insurance agencies. These rules include the following:
- The travel insurance provider must use effective methods to verify the customer’s identity to the best of their ability. Relevant information must also be collected from different sources, including agents.
- Insurers must ensure no policies are issued under fake identities, aliases or anonymous names.
- Insurers must verify the customer’s address and recent photograph to verify their identity. In addition, a self-declaration must be obtained from customers who provide a current address different from the one mentioned in their Aadhar.
- For juridical people:
- Insurers must take steps to identify the juridical person and its owner or beneficiary for the verification process.
- They must check the legal status of the juridical person by assessing several of its documents.
- They must also cross-check if the person on appearing behalf of the juridical person is an authorised individual.
- For individuals who can’t undergo an Aadhar identification, insurers must check their OVDs for genuine reasons like age, illnesses or injuries.
- The insurer should ensure that the travel insurance premium is not disproportionate to the customer’s income.
- Suppose the insurer is unsatisfied with the customer’s true identity or the transaction. In that case, they must file a Suspicious Transaction Report (STR) with the Financial Intelligence Unit-India.
Under the guidelines of the IRDAI, all life and non-life insurance plans will now require KYC documents on purchase and renewal. This will include travel insurance plans. Insurance companies like Tata AIG will require you to provide your KYC documents if you plan on purchasing travel insurance from them, so make sure you have all your necessary documents.