Finance Minister P Chidambaram in the Budget said the Know Your Customer (KYC) norms of banks will be sufficient to acquire insurance policies. This will be applicable for both life and general insurance policies.
In other words, a person already holding a bank account will not be required to give any more documents while buying an insurance cover. Reason: If the customer holds a bank account, it means the person has already submitted his identity and address proof, the key elements to satisfy the rules of KYC norm.
The person will not be asked for any more documents, irrespective of the bank he holds the account in. A customer who wants to buy an insurance policy has to merely submit a certificate from the bank (in which he holds an account), stating he is an existing customer and has satisfied the KYC rules.
“Common KYC for banks and insurance policies will help in faster issuance of policies, make the process simple and reduce fraud as well. This will increase insurance penetration, specially in Tier-II and -III cities,” says Sanjay Tripathy, head-marketing, at HDFC Life Insurance.
However, general insurance companies might insist on a separate KYC in some cases, says Miranjit Mukerjee, CFO at Tata AIG General Insurance, “We will need the potential customer to undergo additional KYC, if their insurance premium exceeds Rs 1 lakh.”
This can be applicable for fire, marine and householder policies, where premiums are usually on the higher side.
At present, to claim tax deduction for life insurance premiums under Section 80C, the premium should not exceed 10 per cent of the sum assured. This Budget has raised the cap to 15 per cent from 10 per cent for policyholders with disabilities. Insurers say this move will benefit policyholders, as insurers typically charge a higher premium citing higher risk to the disabled person’s life. However, this relaxation shall be applicable only for policies issued on or after April 1, 2013.
As of now, one will have to undergo a separate KYC for investing in mutual funds. Going ahead, it is possible a single KYC will suffice for investment in all financial products.
