Insurance companies are trying to work out alternative solutions to Aadhaar-based e-KYC authentication as instant policy approvals and some POS products have had to take a backseat.

Fintech innovations for the sector are being reworked or stopped, and insurers are now either using document-based verification or one-time passwords for online policies, along with scanned documents.

Following the Supreme Court ruling on Aadhaar in September, and new guidelines by UIDAI, the Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers not to seek Aadhaar and PAN or Form 60 from the proposer and policyholder as part of KYC.

In a recent circular, the IRDAI had said that an insurance company can accept Aadhaar card as one of the documents for proof of identity or address of the policyholder for KYC if the person voluntarily gives it.

“This includes physical copy of e-Aadhaar, masked Aadhaar and offline Aadhaar XML. However, insurers will, under no circumstance, do the authentication either using e-KYC facility or Yes/No authentication facility of UlDAl,” IRDAI had said.

Masking numbers

It has also stressed that insurers must ensure that the first eight digits of the Aadhaar number are properly masked, and that they do not store the last four digits in physical or digital forms.

Insurers say that they have already reverted to a physical or paper verification of the customer and, as such, there are no alternatives at present. Further, innovations in fintech that were expected to use e-KYC will now also have to be re-worked.

“The IRDAI guidelines are helpful and provide clarity. However, now physical verification has to be done,” said Tarun Chugh, Managing Director and CEO, Bajaj Allianz Life Insurance. “The impact on insurers has been high. Aadhaar is now voluntary and there is a provision of masking. In any case, it is not e-KYC and no instant authentication can be done,” said an executive with another insurance company, adding that even the use of a QR code would require a set of basic documentary proof from the customer.

A number of banks have also stopped or are re-working their instant account opening facility after Aadhaar-based e-KYC authentication was stopped. Fintech companies are still in discussions with the Reserve Bank of India on alternatives to Aadhaar-based e-KYC authentication, as they believe that paperwork is time consuming and expensive.