The Reserve Bank has always tried to remain adaptable in changing times. Its directive to utilize a video-based customer identification process(V-CIP) for know your customer (KYC) procedures is the latest evidence for this. The announcement came as an amendment in its master direction on the 10th of May 2021.
V-CIP utilizes facial recognition technology to identify the customer. It can also include an authorised official from the regulated entity (usually an RM) performing the live customer due diligence with informed consent for verification. This is far more convenient, secure, and seamless since the whole process is an audio-visual interaction between the RM and the customer.
What Is The RBI’s Directive?
The Reserve Bank stipulates regulated entities(RE) to use V-CIP in Customer Due Diligence(CDD) for:
New individual customer onboarding.
Proprietors(Proprietorship Firms)
Beneficial Owners(BOs) and authorised signatories among legal entity customers.
The directive is also for other RBI regulated entities including banks, payment system operators and NBFCs. Updation of KYC for existing customers and customers who had opened accounts through non-face-to-face modes( Using Aadhar OTP based e-KYC verification) is also to be done with V-CIP.
The RBI provides guidelines for a minimum standard for all REs to maintain baseline cybersecurity for banks and financial institutions. These include them:
House all technology infrastructure in the RE’s premises.
Use secured network domains for V-CIP connection origins.
Ensure all outsourcing of technology associated with the process to be compliant with respective RBI guidelines.
Maintain end-to-end encryption of information between V-CIP hosting point and customer’s device.
Obtain auditable and alteration proof customer consent.
Create a transparent workflow and SOP(standard operating procedure) for all V-CIP related processing.
REs should appoint specially trained officials for operating the V-CIP process. These officials would record audio-video and obtain photographs(mostly real-time) of customers whose identification is to be verified.
These officials can obtain the customer identification information with an Offline or OTP based Aadhaar e-KYC verification. They can also retrieve the required information from CKYCR or equivalent OVD e-document repository through DigiLocker.
How Will It Impact The Sector?
Many financial institutions have already taken up V-CIP as an additional armour of protection against fraudsters and scammers. The RBI’s amendment of the master direction will further encourage more institutions and REs to adopt V-CIP. The usually hesitant players will adopt this mode of technology for their benefit. Even the traditionally slow to adapt government sector banks and NBFCs will also follow suit.
The change would not only affect the REs and institutions, but also the customers in a rather positive fashion. With the pandemic looming over the country, every individual desire to be safe and avoid all in-person interactions. With this directive, the REs and financial institutions are compelled to help solve this issue. With remote V-CIP methods, all customers will be at zero health risk.
Additionally, no customer prefers the extra time commuting and the plethora of documentation formalities that may follow in legacy systems of CDD. V-CIP makes the journey easier, preferable and convenient for the customer, all while saving the REs and their employees time and resources.
But it is important to be aware of how REs avail V-CIP services from Regtech firms. When it comes to such crucial aspects it is always safe to bet on reliable and supportive companies for assistance.
Why Signzy?
Signzy is a ‘no-code AI platform’ for financial services. No matter how complex a workflow or an operation, Signzy can completely automate the back-office operations and decision-making processes into a real-time API. Signzy’s pantheon of V-CIP related products is efficient and reliable to another class.
Some of the features Signzy’s V-CIP and Video KYC products have are:
Real-time OVD verification
Matching face on ID with face in the video (with % confidence score)
Unlimited video storage and instant retrieval
Geo-location capture and IP check
End-to-end encryption for video, channel, and communication
Video forensics for pre-recorded risk and spoof detection
Digital forgery check on the displayed ID proof
Customer identity verification through offline Aadhaar XML
Seamless and interactive UI for live video interaction
Timestamp and audit trail for every application and video interaction
Signzy’s V-CIP services and products are 100% in compliance with all the RBI regulatory guidelines and directives. This is essential as all REs are supervised for the right compliance practices and Signzy offers to negate all possible complications. Signzy’s solutions are easy to use with immediate responses which make it fast and efficient.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
Know Your Customer, is essential in the online gaming realm to ensure the integrity, safety, and compliance of the platform. As the digital gaming industry expands, it’s imperative to verify the identity of players to prevent fraudulent activities, underage participation, and potential misuse for money laundering.
The global online gambling industry was worth more than $45 billion in 2017 and is predicted to rise to $94.4 billion by 2024. With such a stark rise in use and increasingly large sums of money moving through these entities, online gambling and gaming institutions are facing the same scrutiny to which other banks and other financial entities are subject. Prime targets for identity fraud, money laundering, and international financial crime, regulatory compliance is intensifying to ensure that online casinos and gambling institutions are taking serious measures to prevent such illicit activity.
However, as the demand for online gambling services increases, so does the stringency of regulatory compliance. Not only does this mean hiring a large compliance team to deal with the backlog, but online casinos are also now subject to higher costs and wait times for identity verification procedures. In this sense, manual KYC processing for casinos is a little outdated, offering a clunky solution that wastes time, squanders budgets, and is littered with errors.
In the USA, online gambling establishments that have gross revenue of over $1 million are classed as non-bank financial institutions (NBFI). This means they must adhere to similar regulations as banks to help prevent fraud, financial crimes, and money laundering.
The Financial Crimes Enforcement Network (FinCEN) is responsible for monitoring the compliance of AML regulations under the Bank Secrecy Act (BSA). The BSE requires that financial institutions must help the government identify and prevent money laundering by identifying, flagging, and reporting certain suspicious activity and transactions. FinCEN has assigned this responsibility to the Internal Revenue Service (IRS) to ensure compliance measures are being met.
For relevant online casinos, AML measures include filing suspicious activity reports (SARs) for unusual transactions of over $5000, as well as reporting currency transactions of over $10,000. There are also extremely tight requirements for recordkeeping and receipt storage, as well as credit extensions over $10,000.
While all of these AML measures are a must, US online casinos are first required to accurately identify and verify customers using KYC processes. Failure to do so results in unbelievable fines.
In fact, the American Gaming Association (AMA) recently updated its policies. According to these new regulations, US users can not open an account without providing basic PII details: full legal name, address, and social security number. More importantly, however, no real money transactions can be undertaken without submitting an official government ID and proof of a permanent address.
The poignant point here is that AMA’s rules apply to the patron, not the casino as such. In this sense, a US citizen using an online casino in a different jurisdiction must still provide this information. If online gambling platforms don’t have measures in place for this, they are in danger of non-compliance.
Call For KYC In The Gaming Industry – How It Can Help?
Almost 4.4 billion people globally are active internet users as of April 2019. This means that nearly 60% of the human population has the means to connect and interact with the online world around them. It’s no surprise that these combined factors have fueled the market for online gambling and gaming. In an already heavily regulated marketplace, this rapid growth is bringing Know Your Customer (KYC) and Anti-Money Laundering (AML) to the forefront of regulators’ agendas around the world.
With a wide range of options for users to gamble online, it makes sense that the companies that will come out on top are going to strike a balance between compliance and user experience. The question is, how can companies maintain compliance without sacrificing an incredible gaming experience for their users?
Why do online gambling and gaming companies need to be responsible for KYC?
Companies in the online gambling and gaming industries are legally obligated to verify user identity, age, location, and source of funds among other categories to protect their users and platform from bad actors and fraud.
One of the major reasons for this is the need to avoid money laundering and terrorist funding. If proper KYC is not performed on contestants and participants, the platform can be used to launder money and use it for assimilating funds for dangerous organizations. Many laws are created to prevent such practices and most gaming organizers and companies must abide to it.
Just as reputable companies prioritize trust when it comes to providing users with fair play and a secure environment, users must be able to trust that information being collected from them is being handled appropriately and safeguarded.
Companies looking to stay both in compliance and competitive are seeking advanced onboarding & identity verification solutions to…
Protect the company and users from bad actors and fraud
Continuously comply with the latest global regulations
Deliver a seamless, trustworthy, and user-friendly experience
KYC in The Gaming Industry – Mistakes That Could Be Avoided
Casinos deal in financial transactions, often on a very large scale. Online gambling platforms and casinos can turn over millions of dollars a day, making them a prime target for money laundering and financial crimes. Not only that, the lack of face-to-face interaction on internet gambling platforms makes it easier for fraudulent users to play on these sites without detection.
KYC and identity verification processes are designed to help reduce the risks of illicit activity by identifying customers and verifying that this identity is correct. In doing this, suspicious characters and potentially high-risk users can be flagged and monitored, or banned.
As in every industry, a risk-based approach is very important and necessary in the gaming industry. For an AML control program to achieve its purpose, it is very important to identify risks and take precautions against risks. As part of the risk-based approach, game operators must implement risk assessment by implementing AML controls to new customers throughout the customer engagement process. Know Your Customer and Customer Due Diligence procedures describe the controls that must be implemented during the customer onboarding process.
Currently, it’s predicted that 2-5% of the US’s GDP is laundered money, equating to between $800 billion and $2 trillion. Unfathomable sums of this nature have the power to shake the bedrock of the US economy.
While money laundering may seem to be a primary concern for banks and financial entities, studies show that casinos are ripe for money laundering. In 2014, Finnish gambling operators submitted over 9000 money laundering reports.
Studies are showing that criminal groups, known as dot.cons work together to ‘wash’ funds by deliberately losing games and claiming ‘clean’ prize money. A great example of this was The Corozzo Network, operating from 2005 to 2008. The network of 26 members ran illegal gambling and loan-sharking services through four online gambling sites, laundering more than $10 million.
More recently, CG Technology (trading as Cantor Gaming) was fined $22.5 million by various regulatory bodies in 2016 for poor AML provisions. The gambling company’s lack of AML procedures enabled 26 individuals, known as the ‘Jersey Boys’, to launder large sums of money through the platform with bad bets.
Further still, as technology advances, the schemes become more complex. Thanks to the introduction of virtual credit cards, prepaid mobile credit, and alternative payment gateways like PayPal, micro-laundering is now easier than ever and far less detectable.
By introducing strict KYC checks, casinos mitigate the risk of becoming vehicles for money laundering as high-risk individuals are flagged from the outset.
How Digital KYC Can Help The Online Gaming Industry
As we can see from above, KYC and AML (Anti Money Laundering) solutions can save business owners a lot of hassle. Digital KYC systems would have carried out comprehensive background checks identifying possible threats and allowing the owner to take action accordingly. The online gaming industry is a hotspot for money laundering although certain policies are governing the industry the chance is still there that it could be used for terrorist funding.
Signzy is an AI-powered RPA platform that provides digital onboarding solutions with our no-code AI model builder and our Fintech API Marketplace of over 200+ APIs. Our unique solution provides:
Secure System: A customer’s account information is secure because the entire process is online. Identity theft, fraud, loan scams, money laundering, the flow of black money, etc. are all minimized with RealKYC.
Efficient Communication: Effective information can be relayed in an efficient and timely manner. There is no need for constant back and forth. Most details are published automatically unlike manual KYC.
‘Free of Cost’ Process: RealKYC verification doesn’t charge any extra amount to the customer. A company or institution may need to pay automation costs of installing verification systems for the long run but the end-user gets a seamless, almost instant onboarding without hassle.
Faster processing: The RealKYC service is completely automated online. This means that KYC data can be transferred in real-time without the need for any manual intervention. The paper-based KYC process can take days up to weeks to get verified, but the eKYC process takes just a few minutes to verify and issue.
At Signzy, we have also introduced a new form of KYC verification called VideoKYC. This is a faster and more efficient form of KYC collection and verification. It conducts liveliness checks against the user as well as verifies the identification document against forgeries. The VideoKYC product has gained a lot of recognition and won several awards in recent months.
Advantages of using VideoKYC
Higher Application Accuracy
Plug and Play solution, swift Go-To-Market
Comprehensive Training Program
Competitive Advantage through customer delight
100% compliant with the latest RBI Mandate
Exponentially increase Scale of Operations
Reduced back office overheads (up to 70%)
Reduction in customer Drop-offs (up to 50%)
Platform Agnostic, support multiple communication channels
Conclusion
The online gaming industry is evolving rapidly around the world and expanding with each passing day. Gaming sites have improved tremendously in terms of user experience and now, they can make it more secure by enhancing the membership security protocols. Providing different gaming sites the ease of accurate digital ID verification will increase their revenue manifold. The introduction of digital KYC services has already been a huge success in financial and other sectors. Hopefully, its adoption in the near future might lead to more secure online gaming services in the US.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
The base for data privacy and protection is crucial for an upcoming data-driven economy like India. India hosts almost 450 million Internet users and a consistent growth rate of 7–8%, as per Forbes. The transition to a digital economy is radically underway. However, this implies that the processing of personal data is already on the verge of becoming universal.
The population of mobile phone users in India has already crossed the 750 million mark. This number is expected to reach 490 million by 2022. Therefore, personal data and information become available in the public domain. Sources estimate that India has about 390 million millennials and about 440 million generation Z that follows millennials.
The Gen Z generation processes data faster. The most common use of this data is for mobile applications like Snapchat, Vine, and so on, apart from the usual popular social media apps. This leads to the creation of huge amounts of personal data for an individual — be it personal, behavioral, attitudinal, and financial. Which can essentially be used for both illegal and nefarious purposes, like what happened with Cambridge Analytica; Hence, data privacy will be of paramount importance in the coming years for governments across the world specifically to protect their citizens.
The IT Act 2000 — The First Ancestor Of Data Privacy
Under section 43A of the (Indian) Information Technology Act, 2000, a body corporate who is possessing, dealing, or handling any sensitive personal data or information, and is negligent in implementing and maintaining reasonable security practices resulting in wrongful loss or wrongful gain to any person, then such body corporate may be held liable to pay damages to the person so affected.
The Government of India has ratified the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. The Rules provide guidance against protection of “Sensitive personal data or information of a person”. This consists of such personal information which has information relating: –
Passwords
Financial information — Bank account or credit/debit card or other payment instrument information;
Physical, physiological, and psychological health conditions;
Sexual orientation
Medical records and history;
Biometric data.
Section 72 of the IT Act highlights the penalty for breach of confidentiality privacy. The Section provides that any person who, in pursuance of any of the powers conferred under the IT Act Rules or Regulations made thereunder, has secured access to any electronic record, book, register, correspondence, information, document, or other material without the consent of the person concerned, discloses such material to any other person, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to Rs 1,00,000, (approx. US$ 3,000) or with both.
While the IT Act 2000 was not officially cleared for regulating data privacy in India. It can be considered as the stepping stone which laid the foundation for future legislature.
The Supreme Court Ruling of 2016- Amendment Of Data Privacy In Aadhaar Act
In 2016, India amended its biometric identification system, known as Aadhaar. This enabled both the government and private entities to collect an individual’s ID number for any purpose. Human rights advocates had decried this as a violation of privacy. There was a lot of concern and growing uncertainty surrounding this authorization. However, businesses in India continued to require ID numbers for certain services. It was also used for the ID numbers for consumer profiling and targeted advertisements.
The Supreme Court of India amended the 2016 Act which enabled private businesses to ask for customer ID numbers for any purpose. The Supreme Court was required to ascertain the validity of the provisions of the Aadhaar Act. The objective was to verify if the act was contrary to the right to privacy. This was later established as a fundamental right by the Supreme Court in 2017.
Key Findings in the Judgement
The judgment was unanimous with all nine judges concurring with the final order. However, six judges — Justice Chandrachud, Justice Nariman, Justice Chimaleshwar, Justice Kaul, Justice Sapre, and Justice Bobde, wrote separate opinions covering a wide range of issues.
The key points of the judgment are summarized below:
(a) Privacy — A Fundamental Right
The Supreme Court confirmed that the privacy rights of an individual are a fundamental right. It does not need to be separately articulated. It can be considered as a derivative of articles 14, 19, and 21 as mentioned in the Constitution of India. It is a right that subsists as a fundamental consequence of the right to life and liberty. It protects a person from the scrutiny of the State in their home, of their whereabouts, etc.
The same applies to more personal choices like reproductive choices, food habits, etc.
(b) Necessary But Not Absolute Right
The Supreme Court also highlighted that the fundamental right to privacy is not absolute. It will always be subject to considerable restrictions. The State can declare restrictions on the right to privacy to protect justifiable State interests. This can only be done by following the three-pronged method summarized below:
Establishment of a law that rationalizes an encroachment on privacy
A legitimate State aim or requirement which ensures that the nature of the composition of this law falls is reasonably valid. It should also operate to guard against arbitrary State action.
The measures taken by the State are in tune with the objectives sought to be fulfilled by the law.
The Personal Data Protection Bill — India’s First Step To Legalize Data Privacy
Backdrop of The PDP Bill — How it came about
The Supreme Court observed during its judgment that privacy of personal data and facts is an essential aspect of the right to privacy.
Based on this, the Ministry of Electronics and Information Technology (MeitY) formed a 10-member committee led by retired Supreme Court judge B.N. Srikrishna. This committee was hence named the Srikrishna Committee. On 27 July 2018, the committee submitted an extensive draft which is now known as the Personal Data Protection Bill. India is now set to have a comprehensive personal data protection law. On 11.12.2019, MEITY introduced the Personal Data Protection Bill (PDP Bill) in Lok Sabha as Bill №373 of 2019.
The Birth Of PDP — India’s Data Privacy Bill
The PDP Bill seeks to provide for the protection of the personal data of individuals. It also intends to create a framework for processing such personal data. To do so, the bill proposes the establishment of a Data Protection Authority.
Key Takeaways of The PDP Bill
The following are the salient features of the Bill:
The PDP Bill is meant to improve data handling and data privacy in a way that is similar to the European Union’s GDPR.
The PDP Bill emphasizes the need to create a Data Protection Authority (DPA). This will be similar in fashion to the organizations present as part of the members of the European Union. The bill also defines the categories of sensitive personal data that require protection.
The PDP Bill defines ‘data fiduciary’. It also proclaims the various obligations for them. These are based on how they shall obtain, deal/process, and retain personal data.
If the PDP Bill becomes official, businesses would be required to inform users about their data collection practices. They would need the customers’ consent for the same as well. It would be their responsibility have to collect and store evidence of the fact that such notice was given and consent was received. The consumers would have the ability to withdraw their consent. This means that the businesses would have to design systems to allow clients to withdraw their consent on the same.
The PDP Bill gives consumers the power to access, edit, and delete their data after the same is processed to fulfill its objective. As such, the businesses would have to create ways to allow consumers to do so.
The PDP Bill enables clients to transfer their personal data. This can include any inferences made by businesses based on such data, to other businesses.
The PDP Bill mandates all businesses to make changes on an organizational level to protect data better.
How PDP Inevitably Led To NPD
The PDP Bill stipulates that the Central Government can direct a data fiduciary or a data processor to provide anonymized personal data or non-personal data.
This can be done “to enable better targeting of delivery of services or formulation of evidence-based policies by Central Government”.
It was based on this that in September 2019, MeitY formed a committee of experts led by the co-founder of Infosys — Kris Gopalakrishnan. The purpose of the committee was to draft a framework to regulate non-personal data (NPD).
The NPD Framework
As stated above, the Indian government is considering a framework to regulate non-personal data (NPD). The Committee released its report on 12 July 2020 for public consultation/feedback.
A Brief Overview
The NPD framework could affect the entire value chain just like PDP. The impact could range from creators of tech services and products to enablers and consumers. The NPD framework will require companies to obtain user consent. This has to be done before anonymizing data and using it.
NPD includes data generated through online transactions. These can be orders through delivery platforms or any online service. The data is anonymized and all personal identifiers are removed. This data is then harnessed to enhance the quality of service, ML algorithms, and other technologies.
Non-Personal Data Authority — The New Player
There is an apparent need to regulate the collection, processing, storage, and sharing of NPD. For this, the Committee recommends the formation of a separate NPDA authority. The details on the constitution of the NPDA need to be figured out.
As of now, the Committee has highlighted that the NPDA should have some members with relevant industry experience. The Data Protection Authority (DPA) under the PDP Bill protects personal data. Similarly, the NPDA is meant to protect the value of NPD.
The NPDA should work simultaneously with the DPA. The same applies to other sectoral regulators like the Competition Commission of India. The Committee also advises that NPDA should play the roles of both enabler and enforcer.
As an enabler, the NPDA should ensure that NPD is available for various social, public, and economic purposes. This applies highly to legitimate NPD sharing requests. Other areas include:
Regulate and supervise NPD sharing agreements between relevant stakeholders
Supervise the market for NPD.
As an enforcer, the NPDA should overlook the provisions for the proposed NPD legislative affairs. This will include:
Regulating Data Businesses
Mandating the sharing of NPD in certain circumstances
Setting standards and certifying frameworks, including for NPD sharing
NPD safety
Anonymization of PD.
Introduction Of “Data Business”
Under the NPD framework, the Committee advises that private and public sector entities who collect NPD be required to register as a Data Business. This will be dependent upon meeting certain criteria as per the guidelines of NPDA. For entities that do not meet these criteria, this registration will be voluntary. The Committee further recommended that this will be a one-time event. The process for registration will be lightweight and fully digital. The entities must provide details regarding their function. This includes the type of data they collect, process, and use. It also highlights the manner and purpose. To enhance the process, these disclosures will be made with respect to those relating to PD under the PDP Bill, if at all applicable.
PDP and NPD — Similar Grounds
Similar to the classification of personal data under the PDP Bill, the committee classifies NPD into 3 categories namely general, sensitive, and critical categories. The framework also necessitates businesses to obtain user consent before anonymizing even NPD. For example, A cab aggregator wants to aggregate rider travel data from a section of the user base to derive insights. In this case, it would need consent from each rider in the cohort. Execution of this is bound to create practical challenges for companies. It will make analytics a lot more complicated for tech companies as well.
To know more about PDP stakeholders and details, click here
Key Stakeholders of NPD — An Elaborate Overview
The Report lists the following roles for potential players within the NPD framework:
(i) Data Principal — In the case of Public NPD and Private NPD, this is the person (individuals, companies, communities) to whom the data relates. In the case of Community NPD, the community that is the source of the NPD would be the Data Principal. This is similar to the categorization of a data principal under the PDP Bill, in relation to PD, with Data Principals being allowed to exercise significant control and economic rights over their NPD.
(ii) Data Custodian — This is the person who undertakes collection, storage, processing, and use of NPD. Data Custodians may be public or private sector entities who process NPD such as government ministries, telecom companies, or e-commerce entities. Data Custodians must comply with requirements under the NPD Legislation, such as adopting prescribed anonymization standards. NPD must be used by Data Custodians in a manner that is in the ‘best interest’ of the Data Principal. They have a ‘duty of care to the individual or community from which NPD has been collected. This principle is similar to that of a data fiduciary under the PDP Bill, which lays down specific obligations to be undertaken by the data fiduciary with respect to the data rights of the Data Principal.
(iii) Data Trustee — This is the person through which a community exercises its data rights and who takes action to protect the community against any collective harm arising from the use of Community NPD. In most instances, the Data Trustee will be the closest and most appropriate representative body for a community and maybe a government agency at any level (such as the Ministry of Health for data on diabetes in India). However, it could also be citizens’ groups (such as residents’ welfare associations for local data), or civil society organizations. However, there is no clarity provided as to how a Data Trustee would be identified, the eligibility criteria for such an entity, or whether the community data principals play a role in identifying the Data Trustee, and this is to be provided under the NPD Legislation.
(iv) Data Trust — This is an institutional structure bound by rules for handling a specific set of NPD. Such trusts may hold NPD which may be voluntarily shared by Data Custodians, or mandatorily shared NPD on the basis of orders from the government or Data Trustees (as described below in Section 8). However, the Committee has provided very little insight as to how Data Trusts will function, including how such trusts will be constituted, who determines its members, and its role in the NPD ecosystem.
Impact Of NPD — What This Means For Businesses
Tech companies or organizations that meet the currently undefined threshold of collected or processed data will be considered ‘data businesses’ under the proposed framework.
Such businesses will be subject to a host of compliance requirements, including registration, monitoring of operations, and disclosure obligations. They will have to submit metadata about the data they collect to open-access ‘meta-data directories — essentially sharing data on the data they collect.
Based on the above, anyone can query the business for their dataset. Quite obviously, there is a fear that even small companies and startups processing data could qualify as data businesses. Another point of concern is that they will be subject to excessive compliance and data-sharing framework. This will increase operational and data storage costs and hinder the ability of startups to develop their services.
The proposed framework could hamper business prospects by imposing mandatory sharing and a higher compliance burden. Given the absence of a global benchmark for NPD regulation, proposing specific legislation and a regulatory body for NPD without adequate consultation may be premature.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
The Indian insurance sector is on the cusp of a transformative journey, with automation taking center stage. As the country’s financial landscape modernizes, insurers are turning to advanced technologies to streamline processes, enhance customer experiences, and reduce operational costs. Drawing inspiration from global practices, particularly from developed markets, the adoption of automation promises to revolutionize the way insurance is marketed, sold, and serviced in India, ushering in an era of efficiency and innovation.
In 2012, the Indian Insurance Industry was estimated to be US$72 billion in value. Within 9 years, in 2021 it soared to more than US$285 billion. The growth was nearly an increase of 300%. The credit to this rise lies in increased awareness among the people and better measures from the government.
In 2012, the US life and health insurance sector of the insurance industry alone accounted for US$645 billion in size. By 2021 this rose to nearly US$1.2 trillion. How they accomplished this feat is appreciable. There are things to understand and emulate from it. The biggest democracy in the world can learn how the biggest economy in the world handles its insurance industry.
This article delves into the current situation in the Indian Insurance Industry and how the US model of adopting technology through automation is a good guideline. The learnings can be used for not just handling the industry processes, but also accelerating the growth of the whole sector.
Traditional Methods And Automation In The Insurance Sector
While the financial value of the Indian Insurance Industry rose, so did the number of individuals availing insurance. From a mere 20 lakhs in 2012(0.2% of the entire population of 126.58 crores) to an exponential 50 crore(37% of the entire population of 136.64%) by 2021. There is no doubt that there is gain for the whole country. But the major takeaway from this for an insurer is the number of uninsured citizens. 86 crore is certainly not a small number.
The question here is why does such a huge portion of society not have insurance? In most western countries, a state-run medical system ensures the security of the health of its citizens. Thus, the need for medical insurance is minimal. Unfortunately, India can not afford to provide such a facility due to the massive size of the population. This results in individuals taking insurance policies for their life and health.
The citizens of India are not well aware of the need and benefits of insurance. Even the ones who are, find it difficult to access the versatile options insurers provide. Most documentations are not online and require hard copies. Most processing requires in-person interaction. Mediators and agents are sometimes unable to match the applicant to the right policy that will help them. And most of these important decisions are either left to the agent or the customers just pick the first policy that matches their current needs.
Overall the customers are not given much power in accessing or deciding what suits them best. Even if they find a good option, they are doubtful if it is the right option for them due to lack of clarity. Some may even drop the whole idea hoping nothing bad happens. Such a potential market is unused because their experience is not optimized.
How Has The US Insurance Sector Benefitted Using Automation
The US insurance sector is faring better than the Indian counterpart. This is despite the Indian Insurance Sector being superior with a growth rate of 12%-15% and the US falling behind with a 5% growth.
Having said that, health insurance claims fraud in India can be as high as 35% of the claims costs. This is less than 10% in the US. More than 75% of US citizens are covered under some sort of health insurance scheme. The strict regulatory initiatives from the government helps this. But the pivotal role is played by the measures the insurance companies take in protecting their customers.
Insurers protect their clients through increased security and safety while maintaining ease of access for them. The best way to do this is through applications of technology like Automation and versatile APIs. Automating the insurance industry includes implementing it from the get-go of applications to the rounds of claims approvals. Some of the ways in which automation helps the Insurance industry is given below:
Improved Data Management and Customer Service– Automation eases data management. This includes information transfer, new applications, claims status, etc. freeing employee times for more critical tasks. Along with this, as most transactions are online, the customer doesn’t go through the troubles traditional methods demand.
Online Documentation– Since automation uses softcopies of all documents, no physical effort or space is required for storing them. It is easier for the client to obtain and use these documents accordingly.
Better Compliance- Insurance companies can easily comply with existing and new regulations and compliance advice. The easy automation and online processing make it easy for the changes.
Enhanced Fraud Detection- Automation tracks all transactions and processing and call out any red flags associated with forgery or fraud. It can be more efficient and accurate at this than what a human element would have been able to do.
Reduced Processing Time- As most steps in traditional methods are avoided, automation reduces the total time required for application, data management, and even claims processes.
Increased Credibility- Customers find automated processes as no middle man can interfere with the pricing or the claims processing. Insurance companies find it reliable as no malpractice is missed and proper verification is done without unnecessary human interference
Better Claims Processing– discrepancies and disputes relating to claims are greatly minimized as a basic standard is set with compliance with regulatory guidelines. The claims processing is also faster than before as many unnecessary steps in traditional methods such as submitting forms manually.
Where Is India Headed And What Can Be Learned From The US?
India is on a journey towards automation. This is not just in the insurance sector but the financial industry as a whole. As more and more banks and financial institutions are transforming into online platforms, it is only sensible for insurance companies to adopt equivalent methods for themselves.
Even the Government is encouraging the embracing of technology. IRDA launched an insurance repository on 16th September 2013. It enables policyholders and insurance customers to obtain and retain dematerialized or electronic policies. Thus, their policies are kept in an electronic format in an account called eIA(electronic Insurance Account). IRDA prescribed four insurance repository entities:
CDSL Insurance Repository
Karvy Insurance Repository
NSDL Database Management
CAMS Repository Service
Unfortunately, the major players in the industry are still reluctant in adapting to the new ways. Despite, the government’s reforms, many insurance providers still use hard copies of documents and multiple in-person verifications for applications and claims processing.
What the US did with their insurance industry is similar to what they did with their banking industry. They eliminated the steps in processing that are unnecessary or over-resourced. They specifically found the areas that had repetitive work and transferred the responsibility of their execution to an automated source. This in essence saved time, resources, and money.
What the Indian insurers can do in the initial stages is to make use of APIs for online applications and transactions. With Robotic Process Automation(RPA) the processes can be made more efficient. RPA is used to evaluate applications and documents for forgery, credibility, and validity. It is also used to obtain and retain necessary data associated with respective scenarios.
With advancing technology, even AI can be used for insurance process automation. But there are considerable roadblocks for that. The regulatory norms by the government still demand a human evaluation during claims processing. In time, this might change and more advanced technology might find its inroads into the Indian market.
Conclusion
Tapping into the untapped Indian Insurance potential is lucrative. Many companies understand this, yet do not acknowledge it. Indian customers primarily look for inexpensive and comfortable services. With automation, both these demands can be met. Additionally, such a step will provide financial benefits in the long run.
Adapting to modern times is inevitable in the world of cut-throat competition. The Indian Insurance Sector is becoming a cut-throat battlefield for many smaller companies. To stay ahead of the curve, it is wise to adopt newer technology that requires lesser efforts and more benefits.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
In a digitally advancing world, the need for automation is more than ever. This is mainly due to tech-savvy fintech and a surge in the demand for personalized user experience. Today, Intelligent Automation holds the power to accelerate growth. This can be done by integrating robots to digitize processes and systems.
What do we mean by Robots?
Robotic Process Automation (RPA) has been widely used by institutions. However, Intelligent Automation (IA) has been gaining the likes of organizations recently. Intelligent automation combines Artificial Intelligence(AI) and Process Automation to create smart workflows and business processes that think, learn and even adapt on their own. It and its modified forms are called Intelligent Process Automation(IPA).
Across financial institutions, IA has already helped companies drive productivity. This has been achieved by processing a range of structured and unstructured data.
However, the thought of shifting the burden of responsibilities to a robot might be an uneasy one. So without any further ado, let us burst the huge bubbles around Intelligent Automation in the financial sector.
Identifying Roadblocks And The Need Of IPA In Finance
Financial institutions deal with a lot of unstructured data from various sources. Manually processing this could be time taking. This also adds to the chances of error accounting to loss of the institution’s time and resources.
Gartner’s research report on RPA shows that organizations had 80% of their data unstructured. It states how processes that are most suited to RPA have a high transaction throughput of structured digitized data. This comes with relatively fixed processing paths and/or user interfaces. They do not change frequently and are rule-based activities.
Moreover, the banking experience must be customer-friendly. Providing a hassle-free and quick solution is a must. Leveraging IPA improves the institutions’ productivity. It also makes it customer-centric. This helps banks drive massive success.
IPA can process even unstructured data. It improves the accuracy & eliminates chances of manual error. It can also help to validate customer requests by accessing emails and other relevant data.
At the same time, it can process digital signatures and open bank accounts within minutes. It can execute transactions and account transfers and update the customer data into the CRM system.
Revolutionizing Banking and Financial Institutions Using IPA
Let us now see the applications of IPA and how it is transforming the banking and financial institutions.
Commercial lending operations: This life cycle starts with onboarding a corporate client. NLP, ML, OCR, and RPA can be leveraged to extract data from structured and unstructured loan documents and automate the entry of client data. This helps in the calculation of risk and loan eligibility. IA in commercial lending operations is a powerful and effective way to reduce costs. Along with this will help in improving controls, quality, and scalability.
Trade operations: Trade operations require multiple systems and high levels of documentation. IA can be used in several stages to extract data from different sources and formats. It also helps in identifying patterns and classifying the extracted data to get optimal results. IA can also be used in monitoring trade activities. Optical Character Recognition (OCR) technologies, as well as Artificial Intelligence (AI) algorithms, provide end-to-end automation of Trade Finance processes. Systems can improve their accuracy and spot red flags optimizing the use of capital. This can be done through supervised and unsupervised learnings,
Regulatory and compliance operations: There are several regulatory and compliance requirements in banking. This leads to high operational efforts, time and cost. Automation tools can be embedded in several processes. For example, data mapping and other labor-intensive processes. IA can be used to pick up KYC customers and automate the data into AML screening solutions. This can significantly reduce the cost and efforts of compliance operations. This will also help institutions overcome the challenges of inconsistency in data. This inconsistency is due to the long process and the chances of human errors. Several documents available in different formats can be collected. These can be further processed using NLP and OCR technologies.
Transaction screening: An ML engine can identify suspicious patterns and automatically remove them. It can also leave an audit trail of every bot decision for compliance reviews. This significantly reduces operational effort. IPA reduces variation in recording data improving consistency and accuracy. At the same time, it can continuously learn and improve quality over time.
Payment operations: Intelligent automation reduces the manual effort to investigate payment issues. ML can be used to identify a pattern in the payment processes of the customers. Issues related to payment processing can be fixed and suspicious transactions can be identified.
Manual labor is required to process and reconcile invoices. It is also needed to purchase orders in multiple formats. These can be simplified.
Customer Onboarding: The process of KYC collection and verification can take up to 24–30 days. Embedding IA in workflows speeds up the onboarding process. It brings the turnaround time to 2–10 minutes. Relevant data is extracted from the customer’s documents. Then an extensive background check is done by the system. Advanced analytics also help in assessing the potential risks. This also helps in providing a smooth, hassle-free customer experience.
Extending Support To A Wider Spectrum
IA helps banks and FIs stay competitive. It also helps evolve in terms of customer relationships. The capability of IPA solutions to self-learn based on a given set of rules is what makes it unique. Let us look through some other aspects where IA can extend its support.
Predictive analysis- Technology and several statistical techniques can help institutions. These can collectively make a better prediction about the forthcoming future events. Data mining, machine learning, and predictive modeling can help in analyzing the data. It can also gather facts from the present and the past to make better predictions. Incorporating IA with predictive analysis would ease the processing of the data collected. This will collectively improve automated end-to-end decision-making.
Fraud Detection- IA can prove to be critical for anomaly or fraud detection. IPA is capable of processing even unstructured data. Due to this, gathering transactional or other relevant information related to the identity verification of the user will become much simpler.
This collected data then can do an extensive background check of the said user. Any suspicious or fraudulent activity will be notified to the institution. Automating this process reduces the manual labor and time taken. It also increases the accuracy. It can also be used in online, credit/debit card transactions.
CRM systems- Customer relationship management (CRM) systems are useful tools. They help sales employees stay updated with their customers. Automating the update of the system will save the precious time of employees. It also increases accuracy. Employees working in the sales function can focus on maintaining customer relationships. Unstructured data saved in various formats can be processed using IPA.
Tech support- In a digitally advanced world, simpler customer interaction is a must. IA can help solve simple issues. Ex: password resets. It can also diagnose issues by asking a series of questions. This saves the institution’s time and also improves the overall customer experience. Incorporating such technologies will help address the grievances faster saving manual labor.
Financial reports- Aggregating data for financial reports can be a tedious task. Ex: Data on quarter-end. Gathering, processing data from different sources and formats can be made simple and faster with IA.
Benefits of Applying Intelligent Automation In Finance
IA tools can perform a series of tasks ranging from basic data entry to complex risk analysis. IA tools can also be leveraged for dynamic feedback learning. It is also useful for identifying patterns and detecting anomalies. Institutions can benefit from the application of Intelligent Automation in the following ways-
Reduction in manual efforts- Incorporation of IA can reduce the manual grunt work. Automation of structured and unstructured data processing reduces the burden on employees. It also eliminates the scope of manual error.
Increases productivity- Employees can then focus on higher priority tasks. This is because time taking tasks are automated. This will improve both the quality of work as well as the work-life balance of the employees
Better Customer Experience- IA allows institutions to track the progress of work at every step. This end-to-end audit trail is beneficial in optimizing results, thereby making the customer experience far better.
Reduced operational costs- Digitization ensures better risk assessment and assists in faster decision-making. The processes are executed efficiently at a higher speed. This creates a great value for resources.
Conclusion
Intelligent Automation can be incorporated into many such labor-intensive processes across various sectors. It can help in identifying the sources of inefficiencies. It also ramps up productivity effectively. Fintech providers are emerging with simpler solutions with applications that improve customer relationships. Implementing IPA will allow institutions to significantly reduce risks and improve decision-making. Manual resources can then be used to work on high-quality optimal tasks.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
Health insurance policies are a vital instrument in the insurance industry. The Insurance Regulatory & Development Authority Of India (IRDAI), which acts as the regulatory body for all insurance companies in India, has allowed the use of paperless KYC collection, or e-KYC. This e-KYC will also be very useful in the current lockdown in the country. To enable this the government has allowed insurers to avail of the Aadhaar-based authentication services of the Unique Identification Authority of India
KYC Compliance Norms By IRDAI
IRDA has amended the Anti-Money Laundering (AML) guidelines and AML screening solutions which apply to general Insurers. This was done by circular no. IRDA/SDD/GDL/CIR/020/02/2013 on February 07, 2013. According to the guidelines. KYC documents (Proof of identity with photo, address proof) are compulsory for health insurance claims. This is highly applicable if the claim amount is Rs.1 Lakh and above.
Insurers need to verify the identity, address, and recent photograph (in the case of individual customers) as part of Know Your Customer (KYC) compliance norms. In this regard, the following documents are acceptable:
Recent photograph of payee
Proof of Photo Identity of payee
Proof of Residential Address of payee
The following documents are listed as valid Photo Identity Proof (Any One):
Passport
PAN Card
Voter’s Identity Card
Driving License
Aadhar Card
Letter from a recognized Public Authority. (As defined under Section 2 (h) of the RTI Act or Public Servant (as defined in section 2(c) of the ‘The Prevention of Corruption Act, 1988’)
Personal identification and certification of the employees of the insurer for the identity of the prospective policyholder.
Job card issued by NREGA duly signed by an officer of the State Government
The following documents are listed as valid Address Proof (Any One):
Telephone bill with respect to any kind of telephone connection. This can be mobile, landline, wireless, etc. This document should not be older than six months from the date of the insurance contract
Current Bank Passbook — details of permanent/present residential address (updated up to the previous month). Health insurance policies are a vital instrument in the insurance industry.
Updated bank account statement with details of permanent/present residential address
Letter from any recognized public authority
Electricity bill
Ration card
Aadhar Card
Valid lease agreement along with rent receipt which is within the last three months
Points to be NOTED:-
If the Insured person does not possess any of the above, then the following documents are acceptable:
Employer’s certificate as a proof of residence
Written confirmation of identification/proof of residence by the banks where the prospect is a customer
Medical Exam For Insurance
The Medical Exam is compulsory for many insurance companies, especially for volatile cases and cases with large claims value. It allows them to review your medical history and basic information that was used to make your insurance application.
All of the information is collected in the two stages of the medical exam. It is then combined with the statistical longevity data. The information on the insurance application is used to determine if you will be accepted for your insurance policy or not. It also determines what the annual premium will be.
The medical exam will usually include two parts:
A verbal questionnaire in which the medical professional will ask a series of health-related questions
Standard and basic sample collections: During the medical exam a sample of urine and blood may be required for submission. These tests can often be done in your home. You should be notified in advance by your insurance agent or broker which tests need to be conducted.
Duration Of The Medical Exam
The exam is approximately 20 minutes to thoroughly review your medical history verbally with the official. Then, it takes only a few minutes to collect the samples.
Need For Medical Exam By Insurance
There are three reasons health insurance companies administer medical exams:
To verify the authenticity of the information submitted to the company in the application
To review the full medical history of the applicant. The questions pertaining to the exam are designed for an in-depth analysis of your medical history and your family members.
To identify any underlying medical conditions. The applicant may be subject to medical conditions such as diabetes, inconsistencies in the blood work, or HIV. Sometimes the applicant may not be aware of the condition or may have chosen to not declare the same. The company will also verify drug or nicotine use. The information from the medical tests will be matched against the sample test results.
Need For Digitization in Health Insurance
Well, it’s nothing but the process of changing information into the digital format. With each passing year, digitization is becoming vital for the insurance industry. In 2005, people first started searching for digital insurance plans. Since then, digitization has consistently increased in strength in influencing the masses. Fast forward a decade and you can now buy digital policies online within a few minutes. You can find insurers everywhere, selling digital insurance online using social media prowess, and achieving resounding success.
The digital insurance market in the country is witnessing a compound annual growth rate of 25.36%. Digital media has played a crucial role in this spectacular growth and set the blueprint for digital insurance plans. Insurance companies embrace the digitization process with regards to proper digital norms as IRDA spearheads this empowering movement.
Despite filling the details on a website, this conventional method has the following drawbacks:
About 85% of the time and effort goes into manual form-filling, which is a huge pain point for customers and insurers alike.
The conventional method provides lesser room for fraud detection.
Human-errors can lead to catastrophic back-ops failures.
Increased turnaround time leads to increased time for processing claims, onboarding, etc.
Conducting a medical exam can also take time in terms of scheduling and verification.
What do the people gain from going digital for health insurance policies?
The conventional method can have the following disadvantages in terms of customer experience:
93% of customers get irritated by a lengthy & time-consuming onboarding process.
Lack of proper methods of ID verification leads to higher chances of fraud.
A bad customer experience during initiation leads to a broken onboarding journey.
Insurance policies like any other investment are prone to security risks which causes inconvenience to the insurance buyers. Apart from security, there are many other issues that will be resolved due to the Digitization of insurance policies. What is the solution? How is it related to Digitization?
Document portability: One of the major solutions offered by digitization is that the insured will get an e-copy of the documents related to the digital policies in question. Managing Documents has always been a hassle for policyholders. A majority of them end up losing premium receipts, policy cards, and other related documents. These documents may seem insignificant. However, if you plan on availing of tax deduction they can be a golden egg. If the insurance period ranges for more than 5 years, losing documents during such a long period of time may seem logical but is simply unacceptable. Here is where digital insurance comes into play. Since e-copies are stored in cloud-based data-servers; they can be preserved and acquired without putting in much effort. The documents are easily available on any digital device capable of reading and displaying the data. The database is managed by IRDAI approved Insurance repositories. They are
CDSL Insurance Repository Limited (CDSL IR)
Karvy Insurance Repository Limited
National Insurance-policy Repository by NSDL Database Management Limited
CAMS Insurance Repository Services Limited
Better customer service: When people visit the insurance providers for any clarification or data-related queries, they are given a date and are told to come on that day. When you ask them for a reason for this delay, they simply provide polite excuses. This solution is not acceptable for some customers who may require the documents on priority. This may be to file a return urgently or to claim the insurance money. With digitized management not only, the conservation of the data would be easy but providing the customers with the necessary information will be at the push of a button. With a properly formulated digitization, the process of handling customer queries like generating premium calendars, claims, and premium records, online payment of premiums, and tracking consumer requests will gain a faster pace leading to more satisfied customers.
No need to provide KYC for a new policy: When applying for any other type of insurance from the same company, the consumers are often asked for their KYC documents as identity proof. Here, Digitalization might be one of the most convenient solutions for consumers. With their KYC data stored in the company’s repository, all the company must do is overwrite the (Digital) application form with the data cached in their repository.
Monetary Efficiency: Not only do the providers who profit from digital insurance, but also the buyers experience ease in a transaction. Digital insurance can help the term insurance buyers save money on premiums with a 35–40% difference margin. How? When people buy term insurance, they usually buy it from an agent or a broker who adds brokerage or commission which is 30% of the insurance amount on the term insurance premiums. However, when you purchase term insurance online, you get insurance without any brokerage or commission added to the premium which saves you a margin of 30% easily.
Digital KYC For Fraud Prevention In Health Insurance
Fraud in the health insurance industry via impersonating a person is something where some people even go so far as to copy credit cards of another person and make payments using them. Fraudsters often use the medical insurance demographics of a person to gain healthcare benefits or purchase prescription drugs. Any of these situations can prove to be seriously harmful to the victim’s reputation.
Medical identity fraud has some extreme consequences on a person’s life. The financial shock can often be devastating for the insured. The emotional shock is of greater magnitude when a person gets their medical identity stolen. The medical institution itself has to overcome difficulties due to the type of fraud which it encounters. Medical identity theft is on the rise and a growing concern for both patients and healthcare providers. However, modern technology has revolutionized fraud prevention in healthcare.
The Healthcare industry is a booming sector in India and it is also replete with various challenges. Health insurance policies are designed with the intent of providing medical aid smoothly. It is equally vital to understand the health insurance details to gain optimum coverage.
However, the past decade has witnessed a rise in the fraudulent claims made by individuals. There is a constant need to revise the health insurance details, to avoid such deceitful claims. Both the insurance companies and policyholders must work together to tackle the problem.
Let us begin by first understanding the types of fraud in health insurance.
Different Types Of Health Insurance Frauds In India
Opportunity Fraud: This occurs when the policyholder provides inaccurate information while making a claim. One can hide a pre-existing condition or mislead the insurer to get the underwriting in their favor.
Deliberate Fraud: This involves the deliberate presentation of an accident or damage that is covered under the policy.
External Fraud: This is the fraud committed by policyholders, beneficiaries, medical service providers, or vendors against a company.
Internal Fraud: This is the fraud committed by agents, managers, or executives against a company. Even a policyholder can be at the cheating end of it.
Policyholder’s Fraud: It basically comprises the below-mentioned 3 types of frauds — claims, eligibility, and application.
Claim Fraud: Of the various other health insurance frauds in India, this is another one. Under this, the person can make an illegal claim to take advantage of the insurance coverage.
Eligibility Fraud: This is one of the many frauds in health insurance. It occurs when the person fills in incorrect information regarding the pre-existing condition or employment status.
Application Fraud: The concerned individual can enter wrong information to avail the extensive coverage.
Using AI for Fraud Prevention in Healthcare
Health insurance frauds in India can be checked by analyzing the fallacious behavior of frauds. Certain measures have been put in place to deal with health insurance frauds in India.
A strict screening process is being implemented by various insurance providers in India nowadays. Many insurance companies are leveraging technology to detect fraudulent behavior. In order to mitigate risks that threaten the healthcare industry, one must harness technical tools.
In today’s world, there are several third-party identity verification service providers. They offer digital KYC systems that use advanced AI and HI (Human Intelligence) to pick up attempts of fraud.
Online identity verification services authenticate individual users through document and facial verification techniques. This allows them to identify whether a person is using fake or stolen credentials and attempt to defraud the system.
KYC for a Better Customer Experience
Emerging technologies for online identity verification are critical because KYC adds friction to the onboarding process as customers go through the necessary identity verification steps. Long wait times are expensive for insurance companies and frustrating for customers who expect quick and easy interactions. In fact, research by Signicat found that more than 50 percent of retail banking customers in Europe abandoned their attempt to sign up for new financial services. The leading cause? The process simply took too long and was too onerous.
The challenge that every business faces, therefore, is how to balance KYC with the need for fast, efficient onboarding processes that deliver a positive customer experience.
Risk Management
It’s not enough to look at a customer’s risk profile only during the enhanced due diligence process of onboarding. Banks and other organizations must also look for signs of terrorist financing, suspicious activity, or other high-risk behaviors throughout the course of the business relationship.
In general, once a customer has been identified and verified, there is no requirement to re-verify their identity. The exception is when there is a trigger event, for example:
A product or service that you supply the customer changes
Suspicions are raised regarding previous demographic information collected and its authenticity.
Suspicions of money laundering are raised
By performing ongoing monitoring, businesses can implement a continuous risk assessment process that flags customers who may pose increased risks as circumstances change.
Digital KYC As A Means For Customer Onboarding In Health Insurance
With the latest norms for digitization, Signzy has developed two unique KYC products to suit all onboarding scenarios in the health insurance sector. RealKYC & VideoKYC have been developed in compliance with industry standards and offer you the following benefits:
Remote Verification Of Medical Records: When purchasing a new health insurance claim, our digital KYC products ensure the authenticity of all submitted medical records.
Faster Onboarding Of New Insurers: Skip the long wait times for claim verification with RealKYC. Claims can be passed instantly as our patented AI helps reduce 90% of back-ops effort.
Real-Time Insurer Authentication: VideoKYC records the time stamp and audit trail for every application, ensuring all applications are authentic.
Online Medical Exam Through Video Conferencing: The insurers can directly connect with the medical examiner for the medical review which can be completed without hassle in a matter of minutes.
80% Lower Cost For Acquisition, resulting in easier and cost-effective onboarding
Future of digital insurance
Insurance, in most developed countries, is mandatory for every individual. Whereas, in India, policies like Mediclaim are availed only by people in urban areas. The insurance industry, however, is booming with success despite the facts. According to the reports from the BCG by the year 2020, a growth of 2,000 percent is predicted from its current state, while the turnover from the same range up to RS. 15,000 crore.
In a consumer trend analysis conducted by Google, there has been a significant 450 percent growth of searches related to life insurance and health insurance since 2008. On the other hand, the insurance industry itself has witnessed a 600 percent growth in the past five years. Experts believe, in the coming 2–3 years, 75 percent of insurance policy purchases all over the world will be done through digital channels.
The Government’s initiatives like Pradhan Mantri Suraksha Bima Yojana and Rashtriya Swasthya Bima Yojana encourage citizens to take insurance. Many governments in the country are in the early stages to digitize processes of obtaining and claiming insurance.
Digitization might be an elaborate process as most of the companies have employees who are not accustomed to the new digital procedures. On the other hand, it might need to be regulated with proper guidelines and rules to protect both the insurer and the insured against data misuse. One can say, Digitization will give a fair experience to each policyholder.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
The Life Insurance sector, historically reliant on paper-based processes and face-to-face interactions, is undergoing a transformative shift with the adoption of digital onboarding. This digital evolution not only streamlines the cumbersome enrollment procedures but also caters to the modern customer’s demand for quick, hassle-free experiences.
Life insurance policies play a crucial role in the insurance industry. The Insurance Regulatory & Development Authority Of India (IRDAI) is the regulatory body for all insurance companies in India. IRDAI has now allowed the use of paperless KYC collection or e-KYC. To enable this, the government has allowed insurers to avail the Aadhaar-based authentication services of the Unique Identification Authority of India (UIDAI)
Life Insurance Companies can use KYC For Fraud Prevention
Insurance fraud is a reality in this day and era. Many people who commit such frauds do so without realizing 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 necessity for fraud prevention systems in the industry is the need of the hour.
Moreover, the smaller cases are most harmful as they get ignored. After a while, they add up to become a cumbersome amount. Background checks are conducted in the insurance industry as they can single out money launderers, if not the fraudsters. Most people who engage in insurance fraud use fake or stolen identities to execute their schemes. As we proceed with the article, we will point out how KYC services providers can assist the insurance industry.
Frauds Mitigation Through KYC For Insurance
There are many types of frauds that happen with life insurance companies. However, some can be easily avoided by applying secure processes.
Fronting: The insurance policy is taken out using the details of another person to get favorable terms such as lower rates on premiums. Criminals or fraudsters usually use this process to carry out their scams. They use fake or stolen identities to identify themselves as someone else. Then they proceed to create fake documents to support their taken identity. KYC service providers can isolate such attempts and prevent them from happening.
Money Laundering: This is a global problem. Insurance companies too are a common target to launder money. The products offered by insurance companies are easy to target for fraudsters. This is because the processes that are associated with them make it easy for money laundering. Life insurance policies are extremely tempting to money launderers. This is because they allow for heavier premium deposits. Money Launderers take out such policies and deposit large amounts of money while canceling the policies after a while. KYC service providers conduct conclusive background checks. This helps prevent these types of frauds.
The KYC Screening Process
For a productive business, corporates require to deal with the right people with beneficial and favorable intent. Sectors that are particularly in the profession of handling money need to be careful. They must be sure that they are dealing with genuine entities. This is why the life insurance sector has to adhere to KYC norms mandated by their respective regulatory bodies.
As part of the Anti Money Laundering Act, KYC norms help in ensuring that the entity in question has an authentic identity. It is made sure that the source of money is not a shady one. The money would not be used for fostering any criminal activity either.
If we take the life insurance industry as an example, insurance companies deal with three entities-
the insured party
policy taker
agent.
All these entities need to be KYC screened.
Insured party — this is the entity on which the insurance policy is being taken making it imperative to be checked for authenticity. There have been instances when insurance policies have been taken on non-existent or fake identities or on persons who no longer exist. There also have been times when the policy is taken by tweaking a few pertinent details of an individual. The goal of KYC screening is to avoid such a situation.
Policy taker- the entity who is taking a policy should be eligible for taking such insurance. This is the rationale behind screening policy takers.
The insured party and the policy taker are screened with the same method. Their identity proofs are examined for authenticity and the specified address is examined by paying a site visit.
Agent- Insurance companies depend on agents to generate business. An agent is the one who markets the insurance products to individual customers. Agents also educate customers about various products and help them choose the most suitable one. Subsequently, they are also expected to provide all sorts of assistance in taking the policy, paying the premium, and receiving the insured amount when required. Given this significant role, insurance companies are extra cautious about their appointment of agents.
Drawback Of The Current KYC Process
Multiple insurance companies struggle to deliver digital experiences. This is because legacy applications are the most common obstacle for digital transformation. Onboarding a customer in lesser time with due diligence is a challenge.
The existing onboarding process for most insurance companies is similar to the following:
Customer lands on company website
Selects insurance type and plan
Fills-in Occupation, income details, and PAN details as (ID proof).
Life-cover details: pre-filled form
Basic Info: partially filled form
Customer Identity undergoes verification
Customer must enter Lifestyle-associated details
The 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.
Digital Onboarding — Need For Digitization In Life Insurance
Industry analysts and large consulting firms claim onboarding is a top priority for digital transformation efforts across the insurance industry. After all, bad onboarding can increase customer attrition rates by between 25 and 40 percent, according to The Financial Brand.
Industry analyst firm Celent emphasized the need to focus transformation efforts on onboarding. In its November 2018 report, it also talks about industry trends for wealth management firms.
In a study by Bain & Company, customers who use digital channels tend to be loyal to their banks. Digital banking customers tend to own more products, and they transact and engage more with their banks. Mobile-first customers contribute to higher loyalty scores to their primary bank. This in comparison to the clients with low digital behavior. Globally, it is 50% higher approximately.
As noted by Argo executives at the InsureTech Connect conference in October 2018: “Customer acquisition is just the beginning. How you deliver value to customers — that’s the real benefit to them in this ecosystem. We’re trying to create a better experience for everyone we engage.” That means a better onboarding experience.
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.
IRDAI Existing Guidelines For Life Insurance
Every insurer in the life insurance business must provide customized benefit illustrations to proposers or policyholders at the point of sale for all products. The exception can be to those issued under IRDAI (Micro Insurance) Regulations, 2015, Guidelines on Point of Sales (POS) — Life Insurance Products, 2016, and IRDAI (Insurance services by Common Service Centres) Regulations, 2019 as amended over time.
Such benefit illustration shall have to be signed by the prospective policyholder as well as the insurance agent. The signatories may also include the authorized person of an intermediary. Another alternative can be to include the insurer involved in the sales process, as the case may be, This should form part of the policy document.
Further, the benefit illustrations should be constructed as per the specific format prescribed by the IRDAI. The circular contains annexures specifying formats for these illustrations. These apply to different types of policies.
Need For Digital KYC — New Guidelines By IRDAI
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, as per an IRDAI press release. 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.
The IRDAI press release, issued on April 24, 2020, mentions new KYC norms while availing insurance services. These norms will facilitate the general public to easily fulfill.
The release further states that the interested customers/policyholders/claimants may avail paperless KYC services in the coming days from the following insurance companies:
List Of Insurance Companies
Bajaj Allianz Life Insurance Company Limited
Bharti AXA Life Insurance Company Limited
Exide Life Insurance Company Limited
HDFC Life Insurance Company Limited
ICICI Prudential Life InsuranceCompany Limited
India First Life InsuranceCompany Limited
Max Life Insurance Company Limited
PNB Metlife India Insurance Company Limited
SBI Life Insurance Company Limited
Future Generali India Life Insurance Company Limited
Reliance Nippon Life Insurance Company Limited
Aegon Life Insurance Company Limited
Shriram Life InsuranceCompany Limited
Aditya Birla Sun Life Insurance Company Limited
Pramerica Life Insurance Company Limited
Kotak Mahindra Life Insurance Company Limited
Star Union Dai-ichi Life Insurance Company Limited
IDBI Federal Life Insurance Company Limited
Edelweiss Tokio Life Insurance Company Limited
Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited
Kotak Mahindra General Insurance Company Limited
Future Generali India Insurance Company Limited
Manipal Cigna Health Insurance Company Limited
ACKO General Insurance Limited
Religare Health InsuranceCompany Limited
Royal Sundaram General InsuranceCompany Limited
SBI General InsuranceCompany Limited
HDFC Ergo General Insurance Company Limited
HDFC ERGO Health Insurance Limited (Formerly Apollo Munich Health Insurance Company Limited
KYC For Agent Assistance — How Digital KYC Helps
Agents are the fundamental constituents and the first step of the customer towards the onboarding journey. Insurance agents introduce customers to the various products on offer by a life insurance company. They also clear doubts and confusions of the customer and in many cases, collect the KYC for a new customer.
Given below are some highlights on why digital KYC can help insurance agents:
Client identification
The first step which involves identifying the correct name of the entity is a bigger challenge than most people would expect. A significant amount of time is wasted when front office staff or partners provide compliance with details, but of the wrong legal entity.
A common example is a deficiency of understanding in the front end around corporate structures. When a sales rep embarks on a new relationship with an entity, it’s easy for them to use the wrong name. It is very frequent for the holding company to not have the same name as the brand or branch with whom you are engaged in communication.
Initial risk assessment
This is a preliminary setup using customer-provided demographics to assign an initial risk rating, such as high, medium, or low. Such information can contain :
– director and shareholder details
– company incorporation documents
– a basic risk screen to identify major red flags, like sanctions.
Based on the top-level information provided on the client, it is easy to assess the level of risk they can inflict on your organization. However, not all customers will be high risk. With digital KYC, there is no need to dedicate time and resources to performing unnecessary due diligence steps which makes for an inefficient process.
Manual verification
Manual verification is a part of most traditional KYC processing workflows. They 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. Digital KYC can thus help remove the cost and time involved without any additional requirements from the agent side.
Authenticity of Agent
The primary channel through which insurance is sold in India is with the insurance agents. To increase the numbers for sales, agents may end up selling the wrong products to the clients. In such cases, agents do not provide complete information to the customers. This ultimately leads to customers who don’t get the best product. The consequence is a poor customer experience which is a loss for the industry. With Digital KYC, the insurance information can be identified. These cases can then be isolated to prevent further misuse by agents in the future.
Innovating Life Insurance with Digital Onboarding
For easier onboarding, Signzy has developed 2 unique Digital KYC solutions — RealKYC & VideoKYC.
With RealKYC, remote onboarding of new insurers is no longer a hassle. There are many benefits to RealKYC in the life insurance sector as follows:
Zero Paperwork: With RealKYC, customers can easily upload their KYC documents and IDs to the system. No need for making physical copies for manual submission.
Policy In Minutes: With RealKYC, customers no longer need to wait endlessly for the verification process to be completed. Get your life insurance policy active within minutes.
Easy Form Filling: Real-time data pre-population to eliminate manual form filling for submission of new claims.
VideoKYC has gained a lot of attention recently and has been the winner of multiple awards and accolades. With VideoKYC, you can get the following 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 Signzy’s proprietary APIs to verify all official documents and financial statements to mitigate potential claim frauds.
Conclusion
The fact that Digital KYC can be used for fraud prevention and to build trust is evident. Along with this, proper implementation will create a reliable and better onboarding process for the customers and the companies. This can be a boon for the Insurance Sector in India.
The operative word here is ‘proper’. Such an innovative idea demands excellent execution. That can be achieved by collaborating with credible associate companies and startups. If the insurance companies acknowledge this and process it, they will thrive in the booming Indian insurance sector.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
With a US$ 280 billion evaluation, the Indian Insurance sector is a huge market for both domestic and international companies. Life Insurance portfolios alone are expected to grow nearly 75% in the next 5 years.
Unfortunately, insurance fraud has been on the rise around the globe and in India, particularly. The Financial Express reports that more than 9% of claims in the insurance sector are false or fraudulent. Annually, it results in more than Rs.40,000 crores loss. In 2019 alone this was more than Rs.45,000 crores.
Continued, this will result in a massive drain of India’s economic prowess. On top of this over $6.25 billion is lost by insurance companies to fraudsters. This in turn might cause the companies to increase premium rates for genuine customers.
This article takes a detailed look at how that is possible. With some selected cases of fraud that could have been prevented with technology, it gives a better perspective on how useful is technology against fraud.
An act performed to defraud an effective insurance process is called insurance fraud. It occurs primarily when a claimant tries to gain an advantage or benefit not entitled to them. Fraud is deliberate and willful. In this sector, it always involves financial benefits performed under false and illegal pretense.
The Apex entity and the overseer of all insurance business in India, Insurance Regulatory and Development Authority of India(IRDAI) defines 3 generalized classifications for insurance fraud in India:
Claims/Policyholder/Customer Fraud- This includes fraud against the insurance company during the purchase, execution, or claims processing of an insurance product or policy.
Intermediary Fraud- If an Insurance Agent/ Third Party Administrator Agents(TPA)/Corporate Agent or any intermediary perpetrate any fraud against the policyholders, customers, or the insurance company.
Internal Fraud- If a Director, manager, or officer in the higher ranks indulges in misappropriation or fraud against the insurance company.
Out of these three, claims fraud is most common, and they are divided into Hard Fraud and Soft Fraud. If an individual deliberately invents loss such as theft, destruction of property(like arson), or self-inflicted injury to claim benefits from respective policies, it is called hard fraud. Soft or opportunistic fraud includes exaggerated claims by policyholders. The real damages are hidden and an exaggerated representation of the situation is presented.
Insurance Fraud In Different Sectors
Fraudsters find different ways to operate in different insurance sectors. Thus a detailed look at how each sector defines potential fraudulent methods is helpful. Fraudsters usually target the following major fields:
Life Insurance
This is the most expansive field of insurance. This renders it the sector most susceptible to fraud. Most of this fraud occurs during the application process usually with applicants misrepresenting their income, health, personal information, or in certain cases, the true documents. Some of these might be to get less expensive premiums, but many cases are for scamming the insurance companies.
Digitizing the processes by insurance agents is an excellent move by companies. But inefficient implementation of this is futile. Some ways in which fraudsters trick the companies is by creating an additional identity as a beneficiary or faking death to claim the life insurance benefits. Fraudsters may return after disappearing for a few years claiming loss of memory to avoid any penalty.
Sometimes fraudsters withhold information regarding multiple policies. This is not allowed. The customer must provide information regarding all policies concerning the insurer. This prevents a single individual from having multiple claims on a single issue.
Health Care Insurance
Health insurance fraud is the intentional deception, concealment, or misrepresentation of information resulting in healthcare benefits for an individual or group. It can be committed by the policyholder or the provider. Some of the major modes of healthcare frauds are given below:
A policyholder trying to hide pre-existing conditions while applying is fraud. This is done by submitting false medical data or other documents. The legitimate waiting period for individual policies is ousted in such fraud practices.
Documents are outright fabricated to satisfy the terms and conditions of the policy. Insurance companies prefer youthful and healthy people as their customers. But if an aged person approaches them, the company would provide insurance. But the premium costs for this would be high as the risk for the company would be high. People try to conceal their ages in such cases. Faking disability is a divergent fraud practice from this.
Submission of duplicate bills that are either forged or inflated is also fraud. This is important in cases where no actual expense occurred. This is because of the basic understanding that insurance policies are not for profit but security.
A person participating in a fraud ring i.e collude with an agent, doctor, provide, etc to create a false claim is also illegal.
Automobile Insurance
Fraud rings in this sector collude to fake traffic accidents, collisions, or even death to make a fake insurance claim. The objective is mostly money. This ring may include insurance claims adjusters and forgery experts who make phony police reports and other documents. The Insurance Research Council estimates 21% to 36% of all automobile insurance claims to contain suspecting elements of fraud.
Automobile insurance frauds primarily fall under either of the following categories:
Staged Collisions- Fraudsters utilize a vehicle to stage an accident with innocent or involved parties. The fraudsters carry 4–5 passengers in a vehicle and the driver takes an unexpected maneuver that forces the innocent or opposite party to collide with their vehicle. Each fraudster can claim the insurance for the injuries he has been inflicted during the accident. Documents including medical reports and sometimes even identity proofs are forged for this purpose and submitted for evaluation.
Exaggerated Claims- After a real accident has occurred, the owner might incorporate a whole set of previous minor damage into the garage receipt associated with the accident. Personal injuries like whiplash might be exaggerated with false documentation.
Property Insurance
Fraudsters might try to insure a property and then destroy it to claim the insurance. This usually involves arson. They tend to forge the necessary documents to prove that the destruction occurred due to natural causes or disasters.
Selected Scenarios Where Technology Could Have Prevented Scammers
While taking a closer look at how individual insurance fraud cases have fared in India, one thing stands clear- We could have prevented them. Almost all fraud is motivated by money. With technology, we could keep better tracks on scammers and fraudsters. Some of those selected incidents are given below with how technology could have been used to prevent them.
Madhya Pradesh- July 9, 2019.
A 10 member gang in Madhya Pradesh that included a doctor and a lawyer pulled off a brilliant scam for nearly half a decade. With an estimated total of more than 2 crore rupees scammed from insurance companies, the gang was faring very well till early 2019. The gang operated from the Dhar district by forging fake documents of persons in a moribund state and terminally ill people.
The fraudsters first identified their victims that included terminally ill patients. Then they would obtain vehicle finances and life insurance claims in their names. After their natural death, forged certificates proving unnatural causes for their death are submitted. Even the age of these senior citizens was falsified to avoid suspicion. With these forged documents the gang claimed money from the insurance companies.
This is a classic example of how document forgery and pretense are used to defraud companies. This could easily be avoided with technology. If the documents were analyzed by specific and well-equipped APIs or other forms of automation, the fraud could have been detected. As much as a document can be forged, it could never be as good as the original. This difference which is negligible to the human eye can be caught by technology.
Andhra Pradesh- November 26, 2017
A 35-year-old woman declared herself dead to claim Rs.1 Crore from an insurance company. She appointed her husband to raise the claim. The woman’s husband, Syed Shakeel Alam submitted fake documents declaring his wife had died. He mentioned in the documents that his wife was the policyholder.
He approached the insurance company claiming Rs1 Crore insurance. The Rs.1 Crore policy was issued in 2012 and an annual premium of Rs.11800 was paid every year for 5 years. The death report of the woman specified the cause of death as ‘chest pain’. In truth, most of the documents and medical records were either forged or belonged to another woman who had in truth died. Though captured, they had almost pulled off the fraud.
This too could have been prevented if proper technology was used to analyze and identify the documents. Visual verification could have been used to ensure better credibility. The existing APIs available for such measures are very effective. Unfortunately, many companies are yet to adopt these.
Gujarat- January 18, 2021
Four individuals including a doctor, an insurance agent, administrator of a private hospital, and a policyholder claimed insurance with the help of spurious COVID-19 medical documents and records in Vadodara, Gujarat.
Dr. Anil Patel, insurance Agent Pravin Parmar and administrator Dipak Tiwari were the prime culprits. Patel and Parmar would obtain and use bogus medical records. They tried to claim north of Rs.4,00,000. Tiwari tampered with the COVID-19 test samples and pasted the names of policyholders on them. He even tampered with the test results to make them ‘positive’.
The lack of a proper database and the inefficient evaluation of the documents was the major reason this scam had been going on for some time. If the claims processing was more accurate and diligent, this could have been prevented. Technology provides us with APIs and RPA that can be used to make strict verifications and avoid such situations.
How Will Technology help the Indian Insurance Sector?
It is concerning that ‘insurance fraud’ is undefined in the Indian Insurance Act, 1938. Other instruments such as the Indian Penal Code(IPC) or the India Contract Act from the legal system are also void regarding insurance frauds. Thus, it is up to individual insurance companies to take action to prevent it.
One of the best ways is to use technology and automation to mitigate fraud risks.
Most claims are evaluated by agents or officers from the insurance company. They may make mistakes unintentionally or if dishonest may corrupt the process. This negative human factor can be eliminated with technology. It will also provide benefits to the company in the form of saved time and resources. Some of the specific reasons are given below:
APIs can be used to evaluate the document submitted at the time of application and claim. These APIs give unbiased and definitive results. Thus Forgery is detected much easily.
A digital repository of all policies can be digitally accessed by the APIs to decide if the applicant has applied for multiple policies for the same issue. This is not allowed by the government and the insurance company is not liable to pay the unmerited benefit.
Profiles of applicants and policyholders are double-checked with available repositories and history databases. This will help understand the background and history of the customer from a more credible perspective.
Immense time can be saved as a human evaluation would have taken days to complete. But technology can do this in a matter of minutes.
Constant monitoring for any fraudulent activities is possible as any kind of suspicious behavior in the database is detectable.
Lesser resource and manpower is required for conducting the process of policy claims. This saves the company funds.
Conclusion
As technology advances, the world too shall move ahead. Most of the financial sector acknowledges this and adapts to the changing world of automation. Unfortunately, the Indian Insurance Sector seems to be a little slow in this process.
With a growing number of fraudsters and scammers, it is wise for the sector to understand the technology and implement it in the most efficient manner possible This will save them time and resources while creating a well-fortified system devoid of human errors. This in turn will build their credibility and trust in the competitive arena.
It is only a matter of time before the whole sector transforms in the new era, but if the innovators in the field open their eyes and make the process faster, much attrition can be avoided for their companies. That is why adopting technology is not just necessary, but inevitable.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
The Insurance Regulatory and Development Authority of India (IRDAI) has permitted insurance companies to issue policies on the basis of a video KYC (know-your-customer) process. Moneycontrol had first reported the regulator’s plan of allowing insurers to adopt video-based KYC for policy issuance. It has already allowed insurers to use digital modes for validating policyholders’ signatures on documents.
Earlier, the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI), too, had allowed entities such as banks and mutual funds to use video-based tools to complete the mandatory KYC process. The Pension Fund Regulatory and Development Authority (PFRDA) has also permitted distributors to use video KYC for onboarding National Pension System (NPS) subscribers.
IRDAI introduces VBIP
In a circular sent exclusively to all general, life, and standalone health insurers; IRDAI expressed its readiness to introduce a Video-based Identification Process (VBIP) allowing insurers to provide a Video-based KYC method to their customers for KYC verification.
The circular also outlined regulations that will have to be followed to complete video KYC for insurance onboarding. These regulations are similar to the Video-based Customer Identification Process (V-CIP) introduced by the RBI recently, and the Video In-Person Verification Process (VIPV) brought in by SEBI.
The circular encourages the use of AI and other emerging technologies to ease the video KYC process and, on the surface, appears to be beneficial for the insurance sector. But what does VBIP really mean for insurers?
What are the problems with traditional insurance onboarding?
The inadequacies plaguing insurance onboarding are, to a certain extent, shared by manual and paper-based onboarding processes throughout all industries.
Traditional KYC verification in the insurance sector involves — manually creating insurance documents, collecting pertinent identifying documents from the customer, verifying the information in these documents, sending the relevant insurance contracts to the customer, and obtaining the customer’s signatures on these contracts.
This process encompasses numerous inefficiencies and areas due for optimization; some of the problems with paper-based insurance onboarding are –
High operational & onboarding costs: Paper-based KYC methods make use of inefficient and expensive mechanisms for documentation and verification purposes; these include paper documents, manual verification, and disparate KYC workflows. Operational costs are also high due to the manual nature of operations.
Lengthy verification processes & high drop-off rates: KYC verification is tedious and frustrating when done manually. These problems are compounded when the possibility of losing or misplacing paper documents is taken into account. Lengthy verification is also a burden to the customer, leading to low levels of satisfaction, numerous KYC drop-offs, and ultimately a business loss.
Excessive workforce requirements: Paper-based KYC documentation inherently requires a workforce to function; employees are also required to perform ID verification and due diligence on the verification processes. These requirements further exacerbate the operational liabilities of traditional onboarding.
Messy paper trails: Mountains of paperwork are almost a prerequisite for onboarding when a customer visits an insurer. However, all this paper is more than just daunting; it’s needlessly expensive, tedious, and time-consuming. The paperwork also increases the chances of losing or misplacing customer information, thus further increasing the time taken for onboarding.
Manual errors and data security: Manual errors are a certainty in traditional KYC verification. Organizing customer documents, data entry, and KYC verification are all subject to manual error, which significantly costs the insurer. Additionally, paper documents are the least secure when it comes to protecting customer data and can easily be lost or misplaced, leading to distrust amongst customers and further costs.
Traditional insurance onboarding, therefore, isn’t really a walk in the park. What will the alternative proposed by IRDAI look like? The circular gives us some clues.
What are the steps in VBIP?
According to IRDAI, VBIP in practice will be quite similar to the video-based customer identification process (V-CIP) envisaged by RBI a few months ago and also to VIPV.
However, we must note here that the IRDAI circular does not include PAN validation in the steps for VBIP, as opposed to RBI’s V-CIP in which PAN validation is a part of the process.
Now, here are the rules set forth by IRDAI for its new video-based KYC process
KYC verification must be conducted by an authorized official from the insurer via video after obtaining the customer’s consent. This video must then be recorded and stored in a safe place with date and time-stamps.
The official can either perform offline verification of Aadhaar or online OTP-based eKYC authentication provided that the customer voluntarily submits such identifying information. In offline Aadhaar verification using Aadhaar XML or QR code, the official must ensure that the XML file or QR code was generated at most three days before the VBIP process.
The official must capture a live photograph of the customer, ensure that it matches the picture in the customer’s Aadhaar and that the identification details in the customer’s Aadhaar match with those provided by the customer.
The customer’s location is to be determined via geo-tagging to ensure that the customer is in India.
The official must initiate an audio-visual interaction with the customer consisting of a varying series of randomized questions, to confirm liveliness and that the interaction is not pre-recorded.
Insurers must ensure that the process is seamless and takes place in real-time. Additionally, the official will have to make sure that the customer is not covering any part of his or her face and that the video quality is satisfactory so that the customer is easily recognizable.
The audio-visual interaction in question must be triggered from the insurer’s domain and not using third-party services, and the official conducting VBIP must be trained for this specific purpose. The activity log of the official undertaking VBIP and the details of the official must both be preserved.
Insurers will have to carry out security audits and validation to ensure that their VBIP application is secure and end-to-end encrypted before releasing their applications to the public.
All accounts opened via VBIP will only be functional following concurrent audits, underwriting, and verification.
Note here that IRDAI does not explicitly state that these steps are to be followed in a particular sequence; the circular states only that VBIP must consist of the aforementioned steps and that the guidelines must be followed.
Now that we know what VBIP will look like, we must next extrapolate these guidelines to figure out how this new video-based KYC process will affect the insurance industry.
How will VBIP affect insurers?
The IRDAI circular was preceded by decisions from both RBI and SEBI to introduce video KYC for onboarding purposes. This suggests that the introduction of VBIP had a lot to do with the ramifications of V-CIP and VIPV on the financial and securities-related industries.
The impact of video KYC on banking and securities has been exceedingly positive, resulting in massive reductions in onboarding costs and TAT, and several millions of accounts opened via video. Therefore it’s safe to assume that the intention of IRDAI in releasing this circular was to provide these same benefits to the insurance sector, and it’s highly likely that this is indeed what will happen.
As mentioned before, onboarding across industries is quite similar, and hence changes in the onboarding process are likely to shake out in the same way. Given the extensive advantages of video KYC in banking and securities, we can reasonably expect the following benefits for insurers:
Reduced onboarding costs: As with the banking sector, insurers can expect up to a 90% reduction in onboarding costs by digitizing onboarding using video-based KYC methods.
Lowered TATs: Automated verification and digitized documents ensure that onboarding is completed within minutes instead of days.
More completions: Video KYC is streamlined and efficient, allowing for instant KYC verification and smooth onboarding, which is guaranteed to massively lower KYC drop-offs.
Increased customer satisfaction and reach: Customers will no longer have to visit offices carrying folders full of documents to be onboarded but can instead complete their KYC using just a device with an internet connection. This will also allow more people to obtain insurance, which will be a positive development, especially during these times.
Customer safety: Customers, especially those in dire need of insurance, are either unable or too fearful to travel to insurers to obtain insurance. However, video KYC allows such vulnerable customers to complete KYC verification remotely and obtain the insurance they need without stepping outside their homes.
Secure customer data: In an age of frequent cyber-security breaches, data security is a prime concern for both businesses and consumers. Video-based KYC processes such as VBIP ensure the security of sensitive customer data and are instrumental in protecting information.
The benefits of video KYC are numerous, and the adoption of VBIP will certainly positively impact the business performance of insurers.
A video KYC is done to make sure the person buying an insurance policy is real and alive. It allows an insurance official to see you through a live video over the internet. Insurance companies — life and non-life — can now use a video-based identification process (VBIP) to obtain customers’ KYC documents, which is mandatory before issuing a policy. They will have to complete the process through their official technology platforms that facilitate recording videos of policyholders for the purpose. “Insurers may undertake live VBIP by developing an application that facilitates the KYC process either online or face-to-face in-person through video,” IRDAI said in its circular.
How will the process be carried out?
Either the insurers’ staff or authorized representatives can record a ‘clear, live’ video of policyholders at their homes and obtain identification information. “Discussions around implementation are still on. Approaches could vary as per the company. The first option is to enable advisors to visit the prospective policyholder’s house, connect her to the insurer’s employee through the official app and record the video KYC process as per IRDAI’s guidelines. The second option is to send a weblink to the policyholder who will use it to log in online At the other end, the insurer’s employee will record the identification process,” says Anilkumar Singh, Chief Actuarial Officer, and Appointed Actuary, Aditya Birla Sun Life Insurance.
As a customer, you can choose to share your Aadhaar information or any other officially valid document such as a passport and driving license. If you have signed up for the Digilocker facility, you can submit a digitally signed copy. Or, you can simply share it in the form of a clear photograph or a scanned copy of the original document, through the e-Sign mechanism. Your live location will also be captured, along with the date and time-stamp. “Geotagging is a must. The KYC process is valid only if the prospective customer is in India,” says Vaidyanathan Ramani, Head, Product, and Innovations, Policybazaar.com.
At your end, you should also ensure that your face is clearly visible in the video and not covered in any way.
Conclusion
In these COVID-19 times, you will not have to risk visiting an insurance company’s branch or agent’s office to complete the policy purchase process, including KYC verification. Insurers are yet to roll out the process. Once they do, it is likely that you will have to access the insurer’s platform via a link or app shared by the company. You will have to answer questions via a video instead of doing so physically, besides sharing KYC documents online to complete the process. “The questions could be dynamic. Since one of the purposes is to establish that the person is alive, questions could be devised in such a way that responses cannot be standard,” says Vaidyanathan.
While the onus of executing a secure transaction is on the insurer, on your part, ensure that you are dealing with authorized representatives of the company and the video is being recorded through company-authorized channels.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
Car insurance formed 39.4% of all non-life insurance markets in India combined. A major reason for this is India’s swiftly expanding Automotive industry. Automobile sales in India have risen to a 7.01% CAGR between 2013 and 2018. This constitutes the sale of nearly 25 million vehicles in 2018 alone.
The growth in the industry is not going to wane any time soon. But the competition in the field is not getting any easier either. Each Insurer is trying to offer better rates and offers for the customers.
This will be a chance for Insurance institutions to grab a bite of the impending opportunity. They should use every trick they can find to increase customer satisfaction and decrease costs. And the best in the quiver is automation of the entire industry. Automation brings forth other advantages like better customer experience and lesser processing time. This article has a detailed look at how companies can do it and how a few are already doing it.
The Growing Indian Automobile Market And The Potential It Holds
Motor insurance unlike most other insurance options is mandatory. It is used to insure any type of motor vehicle, be it two, four, or eighteen-wheeled. This is for our safety and the safety of others on the street. They do not just cover the motor vehicle but also to an extent, the health care of the individuals involved.
In 2019 India became the fourth largest automobile market superseding Germany with nearly 4 million units sold. By the end of 2021, the country is expected to ascend to 3rd place displacing Japan. Domestic production increased by 2.36% CAGR between 2016 and 2020. All this reinforces the incredible growth of the Indian market.
Unfortunately, A large number of vehicle owners in India are not renewing their insurances because of Insufficient enforcement, Substandard follow-ups by insurers, and increasing third-party cost covers.
The Insurance Information Bureau reported that the ratio of uninsured vehicles increased from 54% in 2018 to 57% in 2019. This implies that more than 13.2 crore vehicles on the street are uninsured. For a country with nearly 50 lakh registered accidents, that’s a lot. The operative word here being ‘Registered’.
The bulk of the uninsured are two-wheelers and vehicles bought at lower cost points. We can infer that owners in this segment consider even the current prices unaffordable. If the prices can be lowered by the insurers, it might will help bring in more customers.
The Existing Claims Process In The Vehicular Insurance Industry
The automobile insurance sector has been afflicted with immense pricing competition, high costs of acquisition, sparse product innovation, fraud, and abuse in vehicle repair networks. Although this has changed over the past decade, many insurers consider cost control to be a solution over better risk selection methods. This might not be the general norm, but it is a possible option many opt for.
In India automobile insurance is classified into primarily three categories:
Private Car Motor Insurance- all privately owned cars and four-wheeled vehicles.
Two Wheeler Insurance- constitutes all two-wheeled vehicles like motorcycles and scooters.
Commercial Vehicle Insurance- includes trucks, taxis, and other commercial vehicles.
Discounting some major corporations, most insurers in India still onboard their customers and provide services in the traditional ways of the past. This not only does produce a bad customer experience but also increases the cost and time required. Physical applications are obtained and processes are conducted in person expending hours of both the agent and the customer.
The insurance claims process is a brutal experience for many customers as multiple documents have to be submitted multiple times to prove their claim. These documents range from the basic policy number to the copy of the vehicle inspection address details. This is tedious and cumbersome for the clients.
There are three major types of claims:
Third-Party Claim- covers any damage to third-party property and healthcare.
Own Damage Claim- covers any damage to your property and healthcare
Theft Claim- Covers compensation in cases of the vehicle being stolen.
The processes for each vary vastly and are confusing to the customer. A systematic method of maneuvering these hurdles is lacking and would help enhance customer experience.
Claims Automation- How Will identity verification API Change The Process?
Traditional methods for verification demand manual assessment and submission of these photos and documents by claims officers. In which case, automation is entirely absent. It may take some hours or even days to assess the extent of damage. Claims automation makes the process require lesser effort from both parties. Most documents can be submitted in soft copies and identity verification API is used to validate and obtain data from them.
This helps insurance inspectors or concerned personnel to fast-track their processes. They can immediately store and retrieve data regarding the case through an online database system. This database system is usually composed of identity verification API that can be selectively used.
In advanced markets, RPA and AI are used for even evaluation and the validity of the claim. In a prime market like India, such innovation requires some more time. But eventually, the process will become completely automated.
Even documents are captured and processed with the help of identity verification API. The credibility of this process is better as the process is performed through strict automation avoiding human errors. The entire process can be simplified with a smartphone application for the processing. In the Back office, the assessment data is analyzed through human intervention. This double-checks the process and ensures the lack of any error.
Advantages and Disadvantages of Automation in Car Insurance
Automation through RPA and AI brings forth multiple advantages for the insurers and the customers. But a detailed insight is needed to have a better understanding of how exactly it benefits the sector and where it could have some improvements.
The Advantages of Claims Automation in Automobile Insurance include:
Time for claims processing is reduced from 5–10 days to a matter of minutes as identity verification API is used to process documents, images, and other data for verification and validity of the claim.
More number of claims applications can be processed as the time and resources required for assessment of each is drastically reduced.
The overall cost for the insurers is reduced as time and resources are considerably reduced. This in turn decreases the overall expenses which can either be added to the company profits or used to reduce the cost of premiums. Thus, attracting more customers.
Automation enhances efficiency and develops cutting-edge equity in the procedure.
As the assessment and processing are not prone to much human error the credibility is increased in cases of disputes and disagreements. This gives more validation to the insurers’ stance.
The efficient automation processing prevents fraudulent claims. As it is much harder to fake an accident or other modes of fraud like fake documents, fraud rates can be reduced to a great extent.
Unfortunately, the current automation methods have not reached their absolute potential. Due to this, they have certain areas of improvement that need to be addressed. Some of them are:
It is still not fully automated. Thus, human intervention to an extent is unavoidable. Perhaps in the future, this too shall be solved.
Assessment is still manual as the claims officer must perform this manually to an extent. This is something that can be improved in the future
Proper management of Cloud data storage and IT security is needed in Automation. The system must be foolproof for hackers and external disruptors.
Conclusion
The booming automobile industry is a lucrative opportunity for insurance companies. But with the newer norms from the government, the competition is only set to increase. As mentioned before, tackling this requires newer methods for processes. Is it not obvious that automation is a better path to take from the stagnating anchors of traditional methods?
Automation through identity verification API, RPA, and AI will create a smoother and easier experience for the claims processes. Its credible assessment and processing of claims bring more validity to the insurers. Overall the industry is set for a change through this. Some of the insurance companies in India like the IFFCO Tokio General Insurance Company Limited have adopted AI to a whole new level. But this is not the case with existing insurers in the automobile industry.
While embracing the perks of Automation, we must acknowledge one other factor. Automation is evolving. This evolution helps in making the processes and in essence our lives more comfortable. Hence, all the players in the industry are predestined to adapt to technology or fall in the coming age of transformation. The right choice is easy to see, but to accept is a bit more tricky.
About Signzy
Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.
Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.
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