After the banking regulator, now the Insurance Regulatory Development Authority of India (IRDAI) is set to open the gates for video-based verification of customers looking to buy insurance products.
The IRDAI said in a letter to insurance companies that they may use video-based identification process to simplify the Know-Your-Customer (KYC) requirements. Moneycontrol has seen a copy of the letter.
This comes a few months after the Reserve Bank of India (RBI), through a notification, gave the nod for video KYC to simplify bank account opening.
“The draft guidelines are already out, some feedback is being sought from industry, and, eventually, the final guidelines will be released soon,” said a top executive at an insurance company who has seen the letter. He spoke on condition of anonymity since the matter is still within regulatory purview.
Process to be consent-based
The process will be undertaken by an official of the insurer through a consent-based audio-visual interaction with the customer, said IRDAI. The main aim of the process would be to obtain identification information from the customer to ascertain the veracity of the application, said the regulator in the letter. Video KYC will be permitted for both life and general insurance companies.
The process will open the gates for complete digitisation of the insurance-buying experience since face-to-face meetings or paper signatures will not be required.
The regulator has warned that systems will need to be audited and security protocols have to be strengthened to ensure that there is no scope of fraud. Further, it has also mandated that all conversations will have to be geo-tagged so that the location of the customer can be finalised and every video call will originate from the insurance company’s domain only.
“Video-based authentication will have two major impacts: one, reduction in the cost of doing a customer’s KYC, and, second, a direct connect with the customer instead of going through the agent or a distribution network, said Rudrajeet Desai, founder, Workapps Product Solutions. Workapps runs the video KYC platform for multiple banks.
If the average cost of KYC of the customer costs Rs 250, in case of a video-based process, it costs only 10 percent of it, he added.
An email to the insurance regulator for comments did not elicit any reply till the publication of the report.
Tech startups see new opportunity
Industry insiders pointed out that digital customer onboarding is already bearing fruit in the banking ecosystem with thousands of accounts getting opened via video every day. Many banks like Kotak Mahindra Bank, IndusInd Bank, RBL Bank and others have already gone live with video KYC for digital banking services.
Tech startups which offer the video KYC platform for banks are sensing new business opportunity with insurance companies.
“The industry has typically operated on the backbone of agents and back-channels. Direct business in insurance contributes less than 10 percent to the overall business. The video-based process leverages these relationships rather than replace it,” said Wriju Ray, cofounder of IDfy.
The Mumbai-based startup works with seven banks and an e-commerce major for this service and is hoping for new business opportunities in the insurance space.