The Ministry of Finance has allowed 23 private insurance companies and state-owned Life Insurance Company to carry out Aadhaar-based authentication under Section 11A of the Prevention of Money Laundering Act, 2002 (PMLA). This means that these 24 companies can ask their clients for their Aadhaar details, something they could not do earlier. However, the clients retain their choice to furnish another form of identification instead of Aadhaar under Section 11A. Live Law first tweeted about it.

What is Section 11A of the PMLA? The government had implemented Section 11A of the PMLA on July 25, 2019, through which every reporting entity (that is, a bank, a financial institution, intermediary or a person carrying on a designated business or profession) had to verify the identity of its clients using Aadhaar, a passport or any other officially valid document. An entity could use Aadhaar authentication only if it was notified by the central government. With the Ministry of Finance’s notification, these 24 companies can ask their clients for their Aadhaar details. As per Section 11A(3), the mode of identification is the client’s choice and “no client or beneficial owner shall be denied services for not having an Aadhaar number”.

How was the decision taken? The decision was taken in consultation with the Unique Identification Authority of India (UIDAI) and Insurance Regulatory and Development Authority of India (IRDAI) as per the notification. As per the procedure for processing applications under Section 11A, set forth in a circular by the Department of Revenue on May 9, 2019, this is what would have happened:

  1. The insurance companies would have filed an application before their regulator, that is, the IRDAI.
  2. Once IRDAI would have been satisfied that the applications meets all requirements, it would have sent it to UIDAI along with its recommendations. If conditions had not been fulfilled by the applicants, IRDAI could have rejected the application.
  3. UIDAI would have assessed the application. UIDAI has the authority to “specify any format in which additional information from the applicant is to be obtained for its examination for grant of Authentication User Agency (AUA)/E-KYC User Agency (KUA) license under the Aadhaar Act”.
  4. Once satisfied with the application, including whether or not the insurance company in question meets UIDAI’s standards of privacy and security, UIDAI would have sent the application, with its recommendation, to the Department of Revenue for notification.
  5. Once the central government was satisfied with the recommendations of IRDAI and UIDAI, it notified the insurance companies.
  6. UIDAI will now issue the authorisation to these companies to conduct Aadhaar authentication.

IRDAI and UIDAI will monitor compliance by the insurance companies, and take action as permitted by their respective laws in case of non-compliance. If the insurance companies cease to comply with requirements for Aadhaar authentication, the central government can withdraw its notification.

List of insurance companies that can now carry out Aadhaar-based authentication

  1. Aditya Birla Health Insurance Co. Limited
  2. Aviva Life Insurance Co. India Limited
  3. Bajaj Allianz General Insurance Company Limited
  4. Bharti AXA General Insurance Company Limited
  5. Cholamandalam MS General Insurance Co Ltd
  6. TATA AIA Life Insurance Co Ltd
  7. TATA AIG General Insurance Company Limited
  8. United India Insurance Co. Limited
  9. Universal Sompo General Insurance Co. Ltd1
  10. LIC of India
  11. Magma HDI General Insurance Company Limited
  12. Max Bupa Health Insurance Company Limited
  13. National Insurance Company Limited
  14. Navi General Insurance Limited (Formerly known as DHFL General Insurance Limited)
  15. Raheja QBE General Insurance Company Limited
  16. Reliance General Insurance Company Limited (RGICL)
  17. Shriram General Insurance Company Limited
  18. Star Health and Allied Insurance Co Ltd.
  19. Edelweiss General Insurance Company Limited
  20. Go Digit General Insurance Limited
  21. ICICI LOMBARD General Insurance Company Limited
  22. IFFCO TOKIO General Insurance Company Limited
  23. Liberty General Insurance Limited
  24. The Oriental Insurance Company Ltd

Voluntary nature of the exercise is of little value: MediaNama’s take

In practice, once Aadhaar-based authentication is allowed, making the process voluntary is of little value and doesn’t offer consumers and citizens a real choice. Most government agencies and private companies tend to make Aadhaar mandatory in practice, even if the rules say otherwise. This is precisely why the Supreme Court had struck down Section 57 of the Aadhaar Act in 2018 as a result of which Aadhaar authentication could not be carried out by private companies for any purpose whatsoever and private companies could not act as requesting entities to use Aadhaar authentication services under any circumstances. However, the Supreme Court’s judgement was significantly weakened when the Parliament passed the Aadhaar and Other Laws (Amendment) Act, 2019 under which voluntary use of Aadhaar as a form of identification was permitted.