Synergy for Widening the Horizonsof the Insurance Industry

G.SURENDRABABUAsst Director General,

Unique Identification Authority of India

Synergy for Widening the Horizonsof the Insurance Industry

G.SURENDRABABUAsst Director General,

Unique Identification Authority of India1

Connecting with the rural masses by UIDAIthrough AadhaarChallenges in Service DeliveryChallenges in Financial InclusionAadhaar OverviewIdentity InfrastructureAadhaar FI platformProgram Status

Aadhaar integration with InsuranceSummary

Agenda

2

Connecting with the rural masses by UIDAIthrough AadhaarChallenges in Service DeliveryChallenges in Financial InclusionAadhaar OverviewIdentity InfrastructureAadhaar FI platformProgram Status

Aadhaar integration with InsuranceSummary

Challenges in Service Delivery• Identity - Inclusion of the undeserving and

exclusion of the deserving; fake, multiple andghost identities

• Various identities currently used based ondemographics that can be easily manipulated

• Accountability - Systemic loopholes do notprovide for absolute accountability of transactionsat all levels

• Identity - Inclusion of the undeserving andexclusion of the deserving; fake, multiple andghost identities

• Various identities currently used based ondemographics that can be easily manipulated

• Accountability - Systemic loopholes do notprovide for absolute accountability of transactionsat all levels

Challenges in Service Delivery

• Reach - With over 600,000 villages in the country,many are denied access to services

• Document based identities that are not amenableto electronic transactions

• No primary key to establish linkage across services• Establishing integrity of transaction – No robust

system to establish authenticity of the beneficiary

• Reach - With over 600,000 villages in the country,many are denied access to services

• Document based identities that are not amenableto electronic transactions

• No primary key to establish linkage across services• Establishing integrity of transaction – No robust

system to establish authenticity of the beneficiary

Challenges in Delivery of FinancialServices

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Challenges in Delivery of FinancialServices

Financial Inclusion - Definition“Financial inclusion may be defined as the process of ensuring accessto financial services and timely and adequate credit where needed byvulnerable groups such as weaker sections and low income groups atan affordable cost “(The Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan).

“Financial Inclusion, broadly defined, refers to universal access to awide range of financial services at a reasonable cost. These includenot only banking products but also other financial services such asinsurance and equity products”(The Committee on Financial Sector Reforms, Chairman: Dr.Raghuram G. Rajan)

“Financial inclusion may be defined as the process of ensuring accessto financial services and timely and adequate credit where needed byvulnerable groups such as weaker sections and low income groups atan affordable cost “(The Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan).

“Financial Inclusion, broadly defined, refers to universal access to awide range of financial services at a reasonable cost. These includenot only banking products but also other financial services such asinsurance and equity products”(The Committee on Financial Sector Reforms, Chairman: Dr.Raghuram G. Rajan)

Financial Inclusion in India

Insurance for Rural India:Over 70% of total populationresides in the rural areas of thecountry. However, insurancereaches less than 3% of the totalpopulation.

Due to high competition andrelatively high market saturationin the urban areas, rural areasprovide ample businessopportunities for insurance firms

Insurance for Rural India:Over 70% of total populationresides in the rural areas of thecountry. However, insurancereaches less than 3% of the totalpopulation.

Due to high competition andrelatively high market saturationin the urban areas, rural areasprovide ample businessopportunities for insurance firms

Challenges in Delivery of Financial Services

– Meeting KYC norms; beneficiary lacking POI and POA– Dependency on Brick and Mortar setups– Reach to rural India limited– Usage of BCs for Financial Transactions has constraints

• No interoperability• Digital Authentication not online

– Meeting KYC norms; beneficiary lacking POI and POA– Dependency on Brick and Mortar setups– Reach to rural India limited– Usage of BCs for Financial Transactions has constraints

• No interoperability• Digital Authentication not online

Potential of AadhaarFinancial Sector regulators (RBI, SEBI, IRDA, PFRDA)

have notified Aadhaar as valid for KYCAs per Rule 2(1)(d) of PMLA Guidelines, Aadhaar isaccepted as an officially valid document for all financialtransactions for the purpose of ID and Address

Online 24x7 eKYC service; instantaneousBCs with microATMs interoperable; all interactions

online

Financial Sector regulators (RBI, SEBI, IRDA, PFRDA)have notified Aadhaar as valid for KYCAs per Rule 2(1)(d) of PMLA Guidelines, Aadhaar isaccepted as an officially valid document for all financialtransactions for the purpose of ID and Address

Online 24x7 eKYC service; instantaneousBCs with microATMs interoperable; all interactions

online

UniqueUniversal

Cost effectiveExtensive reach

Online24X7

6654 3212 9087

Aadhaar – An Identity Infrastructure

Can be linked tovarious services

including insurance

Identity verifiablethrough various

devices

Leveraging Aadhaar platformfor Financial Sector

Online electronic servicePaperless, instantaneousApproved by RBIAudit trail available for tracking

Meeting KYCnorms

eKYC

Aadhaar Enabled Bank AccountAadhaar as POI, POA for KYC as perRBI notification

Opening ofBank Account

AEBAOnline electronic servicePaperless, instantaneousApproved by RBIAudit trail available for tracking

Aadhaar Payment BridgeAadhaar as Financial AddressPayment based on Aadhaar no.

Aadhaar Enabled Payment SystemElectronic banking to the common manInter-operable, portable, convenient

Meeting KYCnorms

eKYC

Payment toBank Account

Withdrawalfrom BankAccount

AEBA• Traditional process for account opening

– paper based, expensive– difficult to reach out– exclusion due to lack of proof– camps are chaotic

• Traditional process for account opening– paper based, expensive– difficult to reach out– exclusion due to lack of proof– camps are chaotic

1. Takes Copy ofdocument

2. Verifies withoriginal

Scannedimage ofDocument

Photocopy- DocumentStorage

Existing Process

• RBI notification recognising Aadhaar as PoI and PoA• e-KYC service – Instantaneous , authenticated,

paperless, low cost,• Handhled PoS / Mobile/Tablet based e-KYC for greater

reach

AEBA – Simplified account opening

e-KYC AuthenticationDevice

1111 2222 3333

e-KYC AuthenticationDevice

KYC data flowsto bank Servers

UIDAI e-KYC Service

e-KYC

eKYC Transaction Flow

eKYC Features

• Compliant with IT Act

• Scalable

• Eliminates Document Forgery

• Paperless

• Consent Based

• Digitally signed by UIDAIand thus non-repudiable

• Instantaneous

• Machine Readable

• Inclusive

• Low cost

Aadhaar based e-KYC Services provide a platform for verification ofProof of Identity (PoI) and Proof of Address (PoA) in the electronicformat with the following features

• Compliant with IT Act

• Scalable

• Eliminates Document Forgery

• Paperless

• Consent Based

• Digitally signed by UIDAIand thus non-repudiable

• Instantaneous

• Machine Readable

• Inclusive

• Low cost

Overview - Aadhaar Payment Bridge

• Payment service offered by NPCI• Aadhaar number linked to resident’s

bank account• Use of Aadhaar as Financial Address

What isAPB?

What isAPB?

What isAPB?

• Enables electronic flow of funds tobeneficiary account

• One time seeding of Aadhaarrequired

• Unaffected by change of bank oraccount by resident

Why APB?Why APB?

APB – Process flow

Last Mile SolutionResidentResident’s bank account

InteroperableSwitch

1. Withdrawalrequest

6. Debit

10. Call / SMS

9. Cash5. Authorize

4. Authenticate

2. Aadhaar no.,transaction data,biometric

BC with Micro-ATM

InteroperableSwitch

1. Withdrawalrequest

3. Forwardto switch

7. CreditUIDAI

8. Confirmation

BC Bank

Key Features of Micro-ATM1. Integrated, handheld, battery

powered2. Connectivity – GPRS, 3G, Wifi3. Standards laid out by RBI and IBA4. Biometric scanners certified by STQCEnables Aadhaar holder to:1. Withdraw money2. Deposit money3. Send and receive remittances4. Balance Enquiry

Micro-ATM: The Game ChangerKey Features of Micro-ATM1. Integrated, handheld, battery

powered2. Connectivity – GPRS, 3G, Wifi3. Standards laid out by RBI and IBA4. Biometric scanners certified by STQCEnables Aadhaar holder to:1. Withdraw money2. Deposit money3. Send and receive remittances4. Balance EnquiryTransaction time less than 15 seconds –

Verified across various geographies

Aadhaar Program Status• Over 82 Crore Aadhaar generated

– Universal Coverage by 2015

• Banks on-boarded onto APB platform – 490• Aadhaar numbers linked in NPCI – 16.9 Crore• IRDA accepted Aadhaar as full KYC (POI and POA)• IRDA approved e-KYC and issued circular;• APB (Jan 2015)- 56,49,249• Txn ₹584,75,81,114• eKYC transactions – 25,475,850

• Over 82 Crore Aadhaar generated– Universal Coverage by 2015

• Banks on-boarded onto APB platform – 490• Aadhaar numbers linked in NPCI – 16.9 Crore• IRDA accepted Aadhaar as full KYC (POI and POA)• IRDA approved e-KYC and issued circular;• APB (Jan 2015)- 56,49,249• Txn ₹584,75,81,114• eKYC transactions – 25,475,850

Insurance Life-CycleLeveraging Aadhaar

Stage Issues Aadhaar Benefits

Acquisition •Costs; •e-KYC •Reducing Costs;

•Exclusion •Better penetration,especially in Rural

Issuance •High Returns (RTS); •e-KYC; •Instant Issuance;

•High TAT •Interoperable BCNetwork withMicroATMs & AEPS;

•e-Insurance Policy

CustomerTracking

•No accurate way oftracking;

•Aadhaar seeding withthe Insured and theNominee

•Fool proof tracking

•Nominee’s details

Insurance Life-CycleLeveraging Aadhaar

Stage Issues Aadhaar intervention BenefitsRenewalBusiness

•High Lapsation •Interoperable BCNetwork withMicroATMs & AEPS;

•Better retention dueto ease of paymentcollection

Settlement •Ensuring thesettlement toreach the rightbeneficiary

•Aadhaar seeding withthe Insured and theNominee;

•Electronic Audit Trailof the Payment

•Ensuring thesettlement toreach the rightbeneficiary

•Aadhaar seeding withthe Insured and theNominee;

•Electronic Audit Trailof the Payment

•Aadhaar Authentication•APB

Fraud Monitoringand Control

•No accurate wayof tracking esp inMediclaim);

•Aadhaar seeding withthe Insured and theNominee;

•Fool proof tracking

Benefits of Using Aadhaar

Benefits to Customer

Connecting with Rural IndiaRobust Flexible Identity Infrastructure establishedDigital Reach to Rural India in placeAccess to Market for insurancePM Jan Dhan Yojana - bank accounts createdUsage of technology in rural India on the rise

Timing is just right to leverage Aadhaar forInsurance in Rural India

Robust Flexible Identity Infrastructure establishedDigital Reach to Rural India in placeAccess to Market for insurancePM Jan Dhan Yojana - bank accounts createdUsage of technology in rural India on the rise

Timing is just right to leverage Aadhaar forInsurance in Rural India