KYC, or Know Your Customer, is a term that is commonly used in the financial industry to refer to the process of verifying the identity of a customer. However, the insurance authority has recently KYC mandatory for people looking to buy general insurance. This includes travel insurance. In this article, we will explore what KYC is, why it is important for this insurance, and how it is carried out.
What is KYC?
KYC, or Know Your Customer is a process that basically involves the process of doing verification of a customer’s identity. For example, if you have an account with a bank, you are required to follow the KYC procedure annually. This helps the bank to keep in check about your identity, especially if any changes have been made. The purpose of KYC is to ensure that the customer is who they claim to be, and to prevent identity fraud.
Why is KYC important for travel insurance?
Due to the new mandate laid down by the insurance authority, KYC has become necessary for people looking to buy the best travel insurance. The insurance is designed to protect travellers against unexpected events, such as medical emergencies, lost luggage, or trip cancellations. However, insurance companies need to make sure that the person purchasing the insurance is actually the person who will be traveling. If someone were to purchase the insurance using a stolen identity, they could potentially file a fraudulent claim, which would cost the insurance company money and could lead to higher premiums for all customers.
In addition, travel insurance companies need to comply with various laws and regulations, including anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. KYC helps insurance companies to comply with these regulations by ensuring that they are not providing insurance to individuals or entities that are on government watchlists.
How is KYC carried out?
There are several different methods that insurance companies issuing travel policies can use to carry out KYC. The most common methods include:
You are asked to provide a government-issued ID, such as a passport or driver's license. The insurance company will then verify the ID to make sure that it is genuine. Make sure all the details on the ID provided by you are up to date. If any details have been changed, notify the company as well as the issuing authority about the same.*
The customer is asked to provide a biometric sample, such as a fingerprint or facial scan. The insurance company will then verify the biometric sample to make sure that it matches the customer's identity. It is important to get your biometrics done only by registered employees of the company from where you are purchasing your insurance to avoid the misuse of your personal information.*
The insurance company checks various databases, such as credit bureaus or government watchlists, to make sure that the customer is not on any lists that would prohibit them from purchasing travel insurance. If you have any outstanding loans or debts, it is important to clear them. If the company sees that you happen to have pending repayments, the domestic travel insurance
policy might not get issued to you.*
The insurance company may use a risk-based approach to KYC, which means that they will carry out additional verification checks for customers who are deemed to be higher risk. For example, a customer who is purchasing travel insurance for a high-risk destination may be subject to additional verification checks. This could include a country which has been hit with several trade embargoes. Your previous travelling history can also be considered as a reason to do thorough checks before the policy is issued to you.*
Things to keep in mind as a potential buyer
There are certain things which you are required to do on your part when co-operating with the insurance company for KYC checks. These include:
- Providing all the correct information such as contact details, address proof and employment details.
- Getting in touch with the insurer as and when required.
- Not withholding any information which might potentially cause problems for you as well as the insurance company in the future.
- If you had any previous policies, disclose information about them as it maintains a track record for you.
The KYC mandate has been introduced to make the process of purchasing policy more efficient for you. As a potential buyer your co-operation helps the company in performing their duties without any problems. Do remember to follow all the instructions given by your insurer when looking to purchase the best travel insurance
policy for your next trip.
*Standard T&C apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.