The Insurance Regulatory and Development Authority of India (IRDAI) plans to ask the government to allow insurance companies to carry out Aadhaar-based electronic-KYC, IRDAI chairman Subhash Chandra Khuntia said at the Mint Insurance Conclave in Mumbai. All private companies, including insurers, are currently barred by the Supreme Court from using people’s Aadhaar numbers to complete the e-KYC process. However, as per a note issued by the revenue department on May 9 (read a copy below), the government could soon allow non-banking private entities – such as insurance firms and mobile wallets – to use Aadhaar-based eKYC.
Khuntia also urged insurers to reduce losses by using technology for data collection and better risk underwriting, the Mint report said. He added, however, that gathering details of customer behaviour should not happen on an individual basis as IRDAI discourages differential pricing for insurance products based on each individual’s data because this goes against the idea of risk pooling.
Non-banking firms could soon apply for Aadhar-based eKYC
The revenue department’s note on May 9 (see copy below) lays out the following application procedure for non-banking entities that wish to carry out Aadhaar-based eKYC:
- The entity must file an application with the appropriate regulator. A fee may be required.
- The regulator will review the application to see that it conforms to Section 11A of the Prevention of Money Laundering Act, 2002 and any other requirements laid down by the regulator. If the application meets these requirements, the regulator will forward it to UIDAI.
- UIDAI will scrutinise each application, taking into account the regulator’s recommendations. A fee may be required here as well.
- After doing so UIDAI will send its recommendation, along with any conditions, to the revenue department for notification.
Alternative digital KYC for telecoms
Last month, the Department of Telecommunications (DoT) issued instructions for an alternative (Aadhaar-free) digital KYC process for new mobile connections and said it would be implemented within a month. Read more about the Aadhaar-free KYC process for new mobile connections here. After the Supreme Court’s ruling on Aadhaar last year, telecom operators had approached the DoT seeking approval for a new, paperless KYC process as an alternative to Aadhaar-based verification. On November 6 the department asked the operators for a proof of concept for digital KYC. Vodafone Idea and Bharti Airtel began rolling out an alternative digital KYC process around the same time.