Car Insurance Background Check in India: Why & How?

Car insurance helps the vehicle owner get financial protection in case of damages caused due to an accident, theft, or man-made or natural calamities. Thus, this type of insurance can be classified as a financial product. Due to this, there are times when insurance companies come across false claims being registered. To put an end to this, insurers now conduct car insurance background checks to be certain that the information provided by the vehicle owner is authentic.

Before the car insurance policy is issued, the background check is done to verify the details shared by the vehicle owner.

Here’s Why a Car Insurance Background Check is Done:

Detecting Fake Profiles:

There are times when people create fake profiles to avail car insurance coverage. Through these profiles, a claim is then raised, without any injury, accident or damage taking place in real life. Checking and detecting fake profiles helps the insurance company understand that the policy they are issuing is to the real vehicle owner, having his vehicle.

A Serious Case of Fraud:

Insurance companies have come across instances where people create a situation of car theft and then raise a claim for the same.

Sharing Incorrect Information:

Usually, insurance companies also come across vehicle owners registering fraudulent claims for damages that have been caused in the past. For instance, at the time of a recent accident, Ram, a customer of an insurance company, registered a claim for old window damage which had occurred 2 years ago. In such cases, insurance companies have to be vigilant before processing the claim.

Reasons for Car Insurance Background Check

Given below are a few reasons why car insurance companies conduct a background check

IRDA has made it mandatory for car insurance companies to do domestic and international anti-money laundering and KYC checks before issuing the car insurance policy to the customer. This, thus ensures that the policy is being issued to the legitimate car owner. In the past, unsuspecting car owners have fallen prey to fraudsters who claim their identity to proceed with a car insurance purchase. The fraudsters then raise a claim, without the original car owner being aware of the claims process. Background checks thus help the insurance company to confirm that there is no identity of theft.

Insurance companies adjust premiums based on the driving behaviour of the customers. Charging the same amount of premium to the vehicle owner who raises a high number of claims and charging the same amount to the vehicle owner who makes no claims is not a good idea. Background check, thus, reduces the impact of fraudulent claims being filed.

Insurance companies have come across instances where the third party has raised claims against their customer’s policy. With no KYC process involved in this case, doing a background check helps the insurance company avoid fraud claim cases.

Insurance Companies Run Background Checking Using the Following

Insurance companies check through the below documents and records to ensure zero probability of fraud claims being filed even when you buy car insurance online.

Information of the Vehicle Owner:

This is done through a KYC check through which the identity proof and address proof of the vehicle owner is verified.

Driving Record:

Driving record of the policyholder is checked to ensure that the vehicle owner is a safe and responsible driver

Criminal Record:

Involvement of the vehicle owner in any criminal case can restrict the insurance company from providing the coverage.

Vehicle Information:

Vehicle make and model details, registration details, manufacturing year, etc. are verified.

Previous Policy Details:

In the case of car insurance renewal, the insurer will ask for previous policy details to verify the information i.e. claim details, policy type, etc. shared by you.

Since heavy financial coverage is involved in the case of car insurance, a background check becomes important for the insurance company to ensure the right person is covered as per the terms and conditions of the policy.

Also Read: What Factors Influence Car Insurance Premiums for SUVs and Sedans?