Banks may be the first to be targeted by regulators when it comes to anti-money laundering and combatting the financing of terrorism (AML/CFT), but they aren’t the only ones. Insurance providers are also exposed to huge risks if they do not respect the regulations in force, and so need to make sure that they implement Know Your Customer (KYC) processes that are both robust and offer the best possible customer experience. Different products (and therefore different risks): what KYC features are needed in insurance? We find out from Alexandre Perrachon, Sales Director | KYC at Webhelp.

A heavy regulatory environment, especially for insurance companies

In 2022, PwC carried out a global economic crime survey, which revealed that “51% of organisations surveyed say they had experienced fraud or another economic crime in the past 24 months”.

6AMLD, Solvency II, the Eckert Law and IDD The insurance sector is one of the most heavily regulated in France and around the world, with financial penalties of up to 20 million euros, or for companies, up to 4% of worldwide annual turnover. Against this backdrop, compliance with AML/CFT regulations has become a priority for the sector.

These regulations primarily impact life insurance providers, who are particularly exposed to the risk of money laundering, due to the massive flow of incoming and outgoing funds, which is why it so important to have rigorous KYC processes.

Non-life insurers are now also on the supervisory authorities’ radar. At the end of 2021, MMA IARD was sanctioned by the French Prudential Supervision and Resolution Authority (ACPR). This was the first time a “non-life” insurance provider was sanctioned for failings in its asset freezing scheme. A huge number of checks are currently being carried out among general insurers, brokers and mutual associations on their different activities, and it is very likely that new sanctions will be imposed.

Automation and AI: essential tools when it comes to tackling today’s challenges

In addition to this regulatory backdrop, which insurers (and their intermediaries) often find tough, there is also the need to offer a smooth, seamless customer experience, even when the products being taken out are already complex.

Like banks, insurance companies have been undergoing a digital transformation over recent years in order to meet changing customer needs. So many digital and technological solutions have been introduced, including mobile apps, chatbots, AI, and remote identity verification using OCR (optical character recognition), which help to simplify the customer journey and offer a positive experience.

For example, since 1st June 2023, customers have been able to terminate an insurance contract electronically. As this requires an identity check for the policyholder, we can assume that it is already possible to verify an ID document remotely, involving the implementation of a KYC solution.

The human touch: an essential component of a successful customer experience

Technology and automation make it possible to streamline KYC processes and improve the customer experience, as long as they are implemented properly. That is why, above and beyond the obligation to be compliant, the roll-out of KYC procedures in the insurance sector must be carefully considered, and fit in with a customer-focused approach, as well as integrating seamlessly with the various distribution networks specific to the insurance sector (advisors, general agents, brokers and other intermediaries).

Human intervention remains essential when it comes to managing more delicate situations such as customer support, manually dealing with automatic document processing, using indicators to improve processes, etc.

In conclusion, the implementation of KYC processes is essential for everyone in the insurance industry, and is an important tool for improving the customer experience and operational efficiency. However, incorporating customer relations right at the very heart of the system requires an understanding of KYC & compliance, but also of the customer experience, requiring large-scale technological and human resources. In addition to this, calling on the services of an expert in outsourcing business processes is an effective way of making sure that insurers are meeting complex regulatory requirements, boosting their efficiency and controlling costs, without sacrificing their internal resources, leaving them to focus 100% of their efforts on their business.

Do you have any KYC needs? Find out more about our Know Your Customer services or contact Alexandre Perrachon.