From January 1, 2023, KYC will be mandatory for all insurance buyers

Time and again, the Insurance Regulatory and Developmental Authority or IRDA brings reforms to the insurance industry in the interest of policyholders. In a recent move, IRDA has made KYC or Know Your Customer compulsory for all those buying insurance products such as health insurance, travel insurance, life insurance, and others. This mandatory requirement of providing KYC documents will be effective from January 1, 2023, and is applicable for all insurance types. 

As of now, it is optional to provide KYC documents while buying insurance products and it is only required if the policyholder is raising a health insurance claim of more than 1 lakh. However, with this amendment, policyholders will now be required to produce all the KYC documents such as aadhar card, PAN, and others at the time of buying the insurance policy, irrespective of the premium amount. Moreover, for all the existing policyholders, IRDA has regulated insurers to start collecting KYC-related data, and the time period allocated for this is 1 year for high-risk customers and 2 years for low-risk customers. Existing policyholders are thus advised to contact their insurer on priority and get their policy updated with all the KYC details. The insurers will also inform the existing policyholders via email or SMS about the timeline for submitting their KYC details. 

This amendment is important to make the claim settlement process faster and hassle-free and quick as all the KYC documents shall be submitted right during the purchase of the insurance policy. The implementation of KYC will also be helpful in rightly assessing the risk profile of policyholders and accordingly setting the premium as well as coverage. Furthermore, this will also reduce the chances of fraudulent claims and make the overall process of buying/renewing/raising claims very convenient. A record of KYC will also provide policyholders with centralised data of policyholders, and help them track the claim-related history and other details of the policyholders. 

Overall, the implementation of KYC at the time of buying an insurance policy will ensure greater customer satisfaction as well as help the insurers carry out everything related to the insurance process in an effective and convenient manner. So, it is thus important to understand that in case an individual fails to provide KYC documents, then they might not be able to buy or renew an insurance plan.

Also read: All You Need To Know About PaidUp Insurance Policy