Insurance regulator IRDA has issued anti-money laundering guidelines that include strict adherence of KYC norms by insurance companies.
IRDA has asked the insurers to put in place a proper policy framework by July 1 as the AML regime becomes effective from August 1.
The AML makes it mandatory for insurers to comply with 'Know Your Customer' norms by obtaining documents to clearly establish the customer identity in case of all new insurance contracts.
Where premium is Rs 100,000 per annum in case of individual policies, a detailed diligence should be exercised to establish KYC.
If insurance premium is paid by person other than the policy holder, the insurer should look into to establish the motive behind it.
The companies are advised to classify the customer into high risk and low risk based on the individual's profile and product profile, to decide upon the extent of due dilligence.
The AML guidelines should be strictly followed in vulnerable products like unit linked products, which provide for withdrawals and unlimited top up premiums; single premium products where investment is made in lumpsum and surrendered at the earliest opportunity; and free look cancellations, especially in the big ticket cases.
However, products like standalone health insurance, group insurance issued by a company and term life insurance contract are exempted from AML purviews.
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