By Ridhima Saxena
Aadhaar will now be required to buy insurance plans even as the government’s decision to make it mandatory for a host of other services has been challenged in the Supreme Court.
All general, life and standalone health insurers must link existing and new policies with customers’ unique ID and Permanent Account Number (PAN) with immediate effect, Insurance Regulatory and Development Authority of India said in an order today. The move is in line with the government’s amended Prevention of Money Laundering Act requiring all financial services entities in India, including banks and mutual funds, to submit clients’ Aadhaar numbers and PAN for know your customer authentication.
The regulator’s decision comes as the Supreme Court is hearing a batch of petitions challenging the validity of Aadhaar. It’s now must to open and operate bank accounts, obtain mobile connections and to file taxes. Petitioners are relying on the apex court’s verdict that ruled privacy a fundamental right.
The insurance regulator’s move may not have any impact on life insurers as most of of them have already begun registering new policyholders with Aadhaar, said Nidhesh Jain, insurance analyst at financial services company Investec. “But for non-life insurers, this may be a problem.”
IndiaFirst Life Insurance said it’s been using Aadhaar for KYC for several months and is equipped to comply with the new norm. “We will reach out to our existing customers through digital means to enable the Aadhaar linkage,” said RM Vishakha, managing director and chief executive officer at the insurer.
The decision may increase their compliance burden for general insurers. “Aadhaar verification for small-value policies like personal accident and home insurance may become a deterrent,” said Joydeep K Roy, partner and leader for insurance and allied businesses at PwC India. The insurance companies would require additional time for preparation to be fully compliant, he said. The move will, however, help keep track of actual insurance penetration in the country, he said.
Bhargav Dasgupta, managing director of ICICI Lombard General Insurance Company, said there may be some short-term challenges to overcome. Yet, the move will prevent frauds and streamline the KYC process in the long term, he said.
Featured image credits: Financial Express