Life insurance policies are a vital instrument in the insurance industry. The Insurance Regulatory & Development Authority Of India (IRDAI), the regulatory body for all insurance companies in India has now allowed the use of paperless KYC collection, or e-KYC. e-KYC will also be very useful in the current lockdown in the country. To enable this, the government has allowed insurers to avail the Aadhaar-based authentication services of the Unique Identification Authority of India (UIDAI).
KYC For Fraud Prevention In Life Insurance Companies
Insurance fraud is a stark reality in modern times. Many people who commit such frauds do not realize that their actions result in higher premium rates that have to be paid by other people. On average, insurance companies lose around $30 Billion every year on account of fraud. The costs of these frauds are levied upon innocent, hard-working people. The need for fraud prevention systems in the insurance industry is the need of the hour. Most people who carry out insurance fraud utilize fake or stolen identities to carry out their schemes. In this article, I try to touch upon how how Digital KYC services providers can assist the insurance industry.
Drawback Of The Current KYC Process
Despite the excitement for innovation in the industry today, many insurance carriers struggle to deliver digital experiences, with legacy applications posing the most common obstacle to digital transformation. Onboarding a customer in lesser time with proper due diligence becomes a challenge in this context.
The current onboarding process for most insurance companies is as follows:
- Customer lands on company website
- Selects insurance type and plan
- Fills-in Occupation & income details and enter PAN details as ID proof.
- Life-cover details: pre-filled form
- Basic Info: partially filled form
- Customer Identity undergoes verification
- Then the customer has to enter Lifestyle related details
- Customer fills the Nominee details
With digital KYC, the following areas can be addressed for a smoother customer experience:
- Form filling is smooth
- Liveliness check ensures more sanity
- Telemedical video conference eliminates back and forth.
Major Challenges in The Life Insurance Onboarding Process
Fragmented signup process — There may be some customers who are unable to complete the signup process in just one session. Ideally, the onboarding process should track progress and let them stop. The process can later restart onboarding effortlessly, from where they left off.
Complex information requirements — Several industries have complicated data requirements and strict compliance regulations. Instances can be financial services, healthcare, and government. State or regional rules frequently oversee the information that needs to be gathered as well as the format. In general, customers have to sift through forms with irrelevant questions. This leads to a struggle to comprehend the exact requirement from them. This often results in high NIGO (not in good order) scores.
Multiple channels and devices — It is possible for customers to choose to onboard across multiple devices, or even via a call center. However, the experience is often inconsistent. Enterprises must provide clients with an integrated and seamless experience on each channel.
Paper-based processes – Many business processes require customers to complete and sign paper forms. They can either scan and fax or even worse, mail them back. No one enjoys this tedious and time-consuming effort, either externally or internally.
Revolutionsing Life Insurance through Digital KYC
Industry analysts and large consulting firms claim onboarding is a top priority for digital transformation efforts across insurance industry. After all, bad onboarding can increase customer attrition rates by between 25 and 40 percent, according to The Financial Brand.
As per the new IRDAI guidelines, Life Insurance policy buyers will soon be able to complete KYC through a paperless process or e-KYC. This requires providing Aadhaar number as proof of identity to insurers. This would make the Know Your Customer (KYC) process much easier for policy buyers.
This e-KYC will also be very useful in the current lockdown in the country. The government has allowed insurers to avail the Aadhaar-based authentication services of UIDAI. This can fulfill the KYC norms of policyholders.
An efficient Digital KYC solution would make the customer onboarding seamless in the following ways:
Zero Paperwork: With Digital/ e-KYC, customers can easily upload their KYC documents and IDs to the system. There is no requirement for making physical copies for manual submission.
Policy In Minutes: With Digital/ e-KYC, customers no longer need to wait endlessly for the verification process to be completed. They can get their life insurance policies active within minutes.
Easy Form Filling: Real-time data pre-population to eliminate manual form filling for submission of new claim.
In addition, VideoKYC, too has gained a lot of momentum recently and insurace firms can get leverage it for following additional advantages:
Proof of Life: With real time in-person verification, insurance companies can easily establish ‘proof of life’ of the insurer from time to time.
Lesser chances of claims fraud: VideoKYC uses a host of proprietary APIs to verify all official documents and financial statements to mitigate potential claim frauds.
In addition to the above, Life Insurance agents too can leverage Digital KYC for a more smooth and safe customer onboarding. Manual verification is a part of most traditional KYC processing workflows. There are multiple scenarios in which these aren’t the most efficient. Several agents have to go through several documents, make sure the information is correct and check for fraud. Humans aren’t anywhere close to being as fast as computers. Automating this process can mean a lot of time and money saved for the company, a higher rate of onboarding and better employee satisfaction through the agent. Digital KYC can thus help remove the cost and time involved without any additional requirements from the agent’s side.
To conclude, Digital KYC can truly revolutionise the insurance industry too, like the banking sector. Its implementation will not only result in higher customer satisfaction for the insurance players but also hold the potentional to significantly boost business and make it more efficient and relevant for the future.
Article contributed by Ankit is the co-founder of Signzy, an AI powered RPA platform for financial services.