Simpler e-verification for online policies

E-insurance policy issuance regulations may be changed to allow authentication using OTP

In a draft exposure released on 2 September, the Insurance Regulatory and Development Authority of India (Irdai) proposed to make e-verification of know-your-customer (KYC) details simpler for customers buying insurance online. It proposes to amend the e-insurance policy issuance regulations that came out in June and become effective from October by allowing authentication by a one-time password (OTP) as well.

“The draft has proposed to recognise electronic signature not just through Aadhaar but from any database that can verify policyholder’s KYC details. E-signature replaces the need for both wet signatures and KYC,” said S.V. Ramanan, chief executive officer, CAMS Insurance Repository Services Ltd.

Currently, only e-authentication using Aadhaar e-KYC services is recognised in the form of an e-signature.

According to the regulations, if a person buys insurance online, the insurer will have to offer an electronic proposal form and ask for e-signatures. This is the practice even now, but, according to industry experts, insurers usually ask for wet signatures for big-ticket policies (premium aboveRs.50,000 in life insurance).

Moving forward, if a policyholder has an e-insurance account, an e-signature won’t be needed to buy a policy online. E-insurance account holds your policy in demat form.

But if a policyholder buys a policy online without an e-insurance account, then e-signature is needed. “These are needed to verify KYC details. Till now a policyholder could give his e-signature using Aadhaar. The number is sent to the database of Unique Identification Authority of India, which confirms the KYC through an OTP on the customer’s mobile. The customer gives this password to complete the e-signature,” added Ramanan.

The industry had sought clarification if single-factor authentication processes like OTPs could be used for verification and Irdai has been willing to grant it to simplify the process. The June regulations only recognised e-authentication if it used Aadhaar-based e-KYC services.

“The requirement of either a digital signature or Aadhaar e-KYC on the prospect (the policyholder) is onerous and may not facilitate issuance of e-insurance policies. It is therefore recommended to allow sale of insurance products using one time password in addition to digital and electronic signatures,” said the draft.

A digital signature works like an electronic one as it replaces a wet signature, but the KYC still needs to be submitted.

“The industry can tap into other repositories to verify KYC. For instance, the customer could give the bank account number which can be used as identity as well as address proof. The bank would then verify the details and send an OTP on the registered mobile number to complete the verification. With e-KYC there is no need for a digital signature,” said Ramanan.

The is a welcome step as it opens many doors for e-verification, making the process of buying a policy online more convenient. “Expanding e-verification is a welcome step to the already existing online payment authentication, which protects customer’s interest. However, insurers need more time to get the systems in place and test e-verification in entirety,” said Sanjay Tripathy, senior executive vice-president and head-marketing, analytics, digital and e-commerce, HDFC Standard Life Insurance Co. Ltd.

Whether you are buying insurance online or offline, from October this year, insurers will have to offer digital policies for big-ticket covers as well. For life plans, if annual premium is more than Rs.10,000, or the sum assured is Rs.1 lakh (Rs.10 lakh for pure term plans), the insurer has to issue e-policies.

For non-life policies—barring health, motor and travel insurance—electronic policies are mandatory if premium is more than Rs.5,000 or the sum insured is Rs.10 lakh or more. For health insurance, the premium or sum insured thresholds are Rs.10,000 and Rs.5 lakh, respectively. For personal accident and domestic travel insurance, this limit is Rs.5,000, or a sum insured exceeding Rs.10 lakh.

These policies can either be issued by the insurer, emailed to you as a PDF document that is digitally signed by the insurer, or sent to your e-insurance account. If the insurer sends you the e-policy directly, it will still have to send you the physical policy documents. If you get the policy in your demat account, then the insurer does not have to send you a hard copy.

Also, it is mandatory for insurers to issue e-policies in disaster-prone and vulnerable areas, as a precaution against damage to policy document.

Irdai is taking suggestions on the draft till 12 September.