COVID-19 has impacted every aspect of our lives and has impacted the overall growth of the country. The face-to-face interactions have reduced and to combat the repercussions of that, businesses are undergoing a digital transformation. Organizations are working towards a new normal, the contactless world with lots of virtualization and digitization.
Circumstances leading to Dwindling Growth of Insurance Industry
The Indian economy contracted by 23.9% year-on-year in the second quarter of 2020. This was due to the lockdown imposed in late March that got extended several times and resulted in pausing most economic activities. A significant and faster-growing sector of the Indian economy is services; comprising trade, hotels, transport, communication, financing, insurance, real estate, business services, and community services. It accounts for more than 60 percent of GDP. Due to the COVID aftermath, finance, real estate, and business services have declined by -5.3% apart from the other sectors like construction (-50.3%), hotels and transportation (-47%), and manufacturing (-39.3%) that recorded the biggest falls.
For everyone, this year is a year of survival. Private spending has shrunk by 26.7%. Wages and salaries are declining. People are thinking and investing in ‘here and now’ first to meet the essentials and then consider spending on long-term goals. When the GDP (gross domestic product) is not likely to do good, people are not focusing on committing long-term plans. One sector that got significantly impacted by the Covid-19 and the changing purchasing patterns of the common man is the insurance industry. The whole industry is facing turbulent times. People are becoming more aware of the importance of life insurance or general insurance but are not investing in policies right now. Moreover, as a relief measure for policyholders, IRDAI provided a grace period of two months to pay the premiums. All of this had a deteriorating effect on the insurance sector.
The Need for Video KYC
The major costs that are borne by an insurance industry involve the customer onboarding costs covering the costs in evaluating a lead and qualifying the lead through KYC. Onboarding customers is currently a time-consuming process and as the company has to appoint REs and send them for in-person visits, it becomes a high-priced process as well. Like any other financial institution, the insurance industry is concerned about things like money laundering, tax evasion, terrorist financing, and fraud in general. As a result of this, the growth of the insurance sector is dwindling.
With the COVID-19 pandemic forcing everyone into their homes, there is a growing need for a cost-cutting paperless system for insurance purchasing and KYC. This is to benefit the insurer as well as the end consumer. Similar to RBI Regulations for V-CIP, a system is required in the insurance sector where the person seeking the service never has to come in contact with the organization providing it.
IRDAI Regulations for Video KYC for Insurers
To counterbalance the deteriorating economic environment, supportive measures have been put in place by the Insurance Regulatory and Development Authority of India (IRDAI). In a circular sent to all general, health, and life insurance companies, the regulator said that companies can use a video-based identification process (VBIP) as a digital medium to improve the ease of completing the KYC process.
Certain rules have been laid out by the regulator that are as follows:
- The authorized person performing the VBIP for KYC should record video.
- A live photograph of the customer present for identification should be captured. The insurer should ensure that the photograph of the customer in the Aadhaar card matches with the person undertaking the VBIP.
- The authorizing person has to ensure that the video is clear and the customer is easily recognizable.
- The customer’s live location need to be captured through geo-tagging to ensure he or she is physically present in India.
- The authorizing person has to obtain the identification information and has to ensure that the identification details in the Aadhaar match with the details furnished.
- The insurer has to ensure that the conversation is taking place in real-time with a live customer. To do so, they will have to ask a sequence of questions involving human gestures from the person undertaking VBIP to make sure that the interactions are real-time.
- To ensure security, the auditor will have to confirm the details collected via VBIP and validate them before the insurance is rolled out.
This process will be a game-changer in the insurance-buying experience. This will open the gates for complete digitization and cut on face-to-face meetings or paper signatures. The onboarding costs would get reduced drastically and will improve the overall experience of both parties. If you are an insurance provider, interested in exploring a robust and low-bandwidth solution for video KYC, then check Ameyo’s Video KYC Solution.
Interested to reduce your KYC completion cost by up to 90 percent with immediate video KYC deployment, talk to our experts now!