You must be well familiar with the Aadhaar. It is a 12 digit unique identification number, issued to all citizens of India. You have to link Aadhaar to your bank account by December 31st. Don't forget this deadline or your bank account may cease to be operational. Aadhaar must be linked to your mobile number. Operators have been given a deadline of February 2018 to link Aadhaar with mobile numbers.
You have to link Aadhaar with PAN, Aadhaar with mutual funds, Aadhaar with your LPG connection to enjoy subsidy benefits, Aadhaar with your pension account....Well pretty much everything. It's no surprise that it is now compulsory to link Aadhaar with insurance plans.
IRDA the insurance regulator in India, has said it is mandatory for Insurance plans to be linked with Aadhaar and insurers must comply with these rules. This is to prevent money laundering as per Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017. Want to know more on insurance? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
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There are 54 insurers in India. The private sector has 23 life insurers, 18 general insurers and 5 health insurers. IRDA has asked insurers to make sure that Aadhaar is linked with insurance plans. IRDA has sent a communication to all life and general insurers that the rules have "statutory force" and must be followed.
IRDA has said that Aadhaar and PAN are compulsory for obtaining financial services. This also includes insurance plans. If you don't have PAN, then Form 60 is mandatory. Form 60 is compulsory if you don't have a PAN and get involved in certain kind of transactions. IRDA has not set any deadline for linking Aadhaar to insurance plans and you can do so at your own comfort.
Linking Aadhaar with Insurance plans will create a unified platform for financial services. It could also promote the Government's agenda of digitization.
The main purpose of linking Aadhaar with insurance plans is to prevent money laundering. Money laundering is converting black money to white, using the financial system. Money laundering in insurance plans take place when insurance premiums are paid in cash. This is why insurance has KYC (Know Your Customer). It is compulsory to quote PAN if you pay a premium of more than Rs 50,000 in a financial year in cash for a life insurance plan.
Now the Government is taking this to the next level. If Aadhaar is linked to Insurance plans, money laundering can be really difficult. Currently, life insurers are not allowed to settle claims in cash. The claim amount will be sent only to bank accounts which would soon be linked to Aadhaar. Many life insurers are already asking for PAN for all life insurance plans, even though IRDA requires this only for life insurance premiums paid in cash above Rs 50,000.
You can expect insurers to be reasonable for claims which have to be paid out immediately. But in the long run, you will have to link Aadhaar with insurance plans.
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If you and other citizens link Aadhaar with insurance plans, it would eliminate fraud in the industry and also streamline the KYC process. In foreign countries mainly for non-life insurers, its common to base auto insurance premiums on the track record of the owner and not the vehicle.
If non-life insurers in India base the auto insurance premiums on the track record of the owner and not the vehicle, it could lead to hassle free claim settlement and perhaps fall in auto insurance premiums. This is beneficial to both, insurer and customer.
The process of linking Aadhaar with Insurance plans may be similar to bank accounts. You could link Aadhaar with Insurance plans by text message, online or by simply visiting the branch.
Linking Aadhaar with insurance plans may face a few difficulties in the short run, but in the long run, it has a lot of benefits. This could be a game changer for the insurance sector as it will bring transparency in the industry. Be Wise, Get Rich.
Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.