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.
So which video KYC service should you choose?
Are you ready to onboard with video KYC?
When deciding on which video KYC service to use, it’s always best to go with a trusted service provider who knows what they’re doing.
SignDesk has provided digital documentation and KYC verification solutions for over five years to 350+ clients, including major banks. All of our customers have experienced up to a 90% reduction in onboarding costs and a 20% increase in efficiency.
We have also been recognized for our innovative solutions in the form of numerous awards, the latest of which is the Global Banking and Finance Review’s Best Digital Onboarding/ KYC product in India for 2020.
Our video KYC solution is equipped with the latest ML technology to perform facial recognition, automated data extraction, and document verification, and is entirely compliant with IRDAI regulations. Additionally, our video KYC solution includes options to create legally valid insurance documents using templates and Aadhaar eSign to sign these documents remotely.
Customer onboarding and KYC verification are our bread and butter at SignDesk, and we can help you experience the full benefits of digitization with our award-winning KYC solution.
Curious to learn more about how VBIP can cut costs and save time? Book a demo with us now!