Know Your Customer – KYC policy of Banks

KYC – Know Your Customer

Guest Author Himanshu Sharma from FinanceNectar shares with readers of our blog regarding KYC policy of banks, objective of KYC policy and Guidelines of KYC policy.

Well, first of all, let us have look at the brief explanation about KYC policy of banks:
KYC policy is an abbreviation of “Know Your Customer” policy. In  India, KYC policy enforce by the Reserve Bank of India (RBI) for all commercial banks. Under the KYC policy, commercial banks are required to observe various activities such as, Proper identification of customer, help in controlling financial frauds, monitoring on all the large transactions of cash, get residential certificate of their customers, etc. RBI has been issued various instructions at time to time and given advice for wakeful from their customers activities. Bank customers can misuse banking system, if bank does not follow the KYC policies.
Here we define the following guidelines of KYC policy, which are also applicable in transactions of foreign currency.

  1. First guideline for banks is that, banks should have verified the identification of bank customers. Banks should not think that ensure this information only for his benefits. This information is such a confidential for government and for other purpose.
  2. Second guideline for banks is that, monitoring/inspecting all the transactions of their customers, which are suspicious nature. If they find any mistake in transactions, then reporting of such transaction to appropriate authority.
  3. Banks should ensure that all the travellers cheques, mail transfers, demand drafts and telegraphic transfers of Rs. 50,000 and more, by debit to their customer account but this is possible only against cheque not cash. The cash transactions of applicants of Rs. 10,000 or above, should affix by their Permanent account number (PAN).
  4. Banks are required to keep a close watch on their clients, who deposit and withdraw from banks with an amount of Rs. 10,00000 and above. They require maintaining a separate register for their clients and their huge transactions.
  5. Banks are required for sending the details of suspicious transaction to controlling offices during a particular period of time. On the other hand, controlling offices are also responsible for sending these suspicious nature details to the Head office of bank. After that, all essential steps against these transactions are taken by the Head office of bank.

Well, after discussing about guidelines of KYC policy, we mention here four key elements of KYC policy which are incorporated and framed by banks as guidelines of KYC policy. Banks should obey these four elements in their banking procedure, which are as follows:

  1. Customer Identification Procedures,
  2. Customer Acceptance Policy,
  3. Risk Management,
  4. Monitoring of transaction.

Commercial banks maintain and provide all essential information for their clients. They provide information, which is related to the amount of transaction and the currency in which it was designated. They also provide the date information, which means, they facilitate the transaction date when transaction was conducted. Lastly, they provide information which is related to the parties of transaction. All information of their parties, who conduct their transactions, is provided by commercial banks.

For controlling the transaction of money laundering, banks use new technologies such as, ATM card, Credit Card, Internet banking, etc., for money laundering. Whenever user uses this card for any purpose, all their details and the nature of purpose are saved in their bank. The Bank informs their customer and also provides information regarding which goods or services are added in their bill with an appropriate amount. However, one thing which is more significant for banks is that, KYC policy procedure are taken or absorbed by all commercial banks before issuing the cards to the customers. It is mandatory for all commercial banks.

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Other expenses and charges in health insurance policy!

What are other charges and factors for a health insurance policy?

Organ Donor Expenses
In case of organ failure (especially kidney failure), transplantation of the organ become necessary. In such cases, a person of the family donates the organ to save the life. In such case two persons are hospitalised and expenses incurred may be nearly doubled. Health Insurance covers cost of hospitalization for person receiving the organ while expenses incurred by person donating the organ ware not covered even if he/she has health policy. There are few companies like Max Bupa which covers the cost incurred for person donating the organ subject to overall limit.

Domiciliary Treatment
This is not so important criterion while selecting an health insurance plan since as per the terms conditions, reimbursement for domiciliary treatment is rare. Domiciliary treatment covers expense incurred for medical treatment for a period exceeding three days for such illness/disease/injury which in the normal course would require care and treatment at a Hospital/Nursing Home but actually is taken while confined at home in India due to the following reasons:

  1. The condition of the patient is such that the patient /she cannot be moved to the Hospital/Nursing Home or
  2. Due to lack of accommodation at the Hospital/Nursing Home, the patient cannot be removed.

The condition should continue for 3 days. Certain illness like Asthma, Bronchitis etc. are excluded.

Pre & Post hospitalization Expense
This is important but not critical factor in selecting a product or company. Most companies allows 30 days pre-hospitalization and 60 days post hospitalization expense. So expenses incurred for medicine or for consultation in case of post hospitalization are covered. Some Companies specify upper limit for post-hospitalization expense. These are covered only when the hospitalization claim is accepted by the Insurance Company.

Emergency Ambulance Charges
This is again a desirable feature since in case of emergency or post surgery, ambulance services might be needed by the patient. Nearly all the Insurance companies provide for the Ambulance charges, different company have different limit starting from Rs 750 to Rs 2000/- per hospitalization. Companies also specify maximum limit towards ambulance charges in a year.

Day Care Treatment
With medical advancement of technology, hospitalization for treatment of certain diseases is not mandatory. Insurance Companies realises this fact. Further due to no hospitalization, lodging & boarding expenses are saved. Expenses incurred on treatments of diseases like the following are also covered (even though the hospitalization is for less than 24 hours) –
chemotherapy, radiotherapy, eye surgery, dialysis, lithotripsy, tonsillectomy, d&c, cardiac catheterization, cataract, coronary angiography, coronary angioplasty, hernia repair surgery and hydrocele surgery etc. Various Companies have specified list of surgeries whose treatment are covered. The number of day care surgeries ranges from 9 (ICICI Lombard) to 146 (Apollo Munich) to all (Max Bupa). This is an important fact to consider since with further advancement, this list will grow.

Daily Cash Benefit
Normally in case of child hospitalization, one adult attendant is needed. In such cases, the expenses increase. Only Apollo Munich pays fixed daily amount for the accompanying adult with child below 12 years for hospitalization of more than 72 hours.

New Born Baby Coverage
The minimum age for Health Insurance coverage is 3 months. Therefore the new born babies are not covered under Health Insurance policy. However in case the maternity expenses are paid by the Insurance Company (like Max Bupa, Apollo etc.), the expenses incurred on the New Born Bare baby are allowed, subject to limit. Vaccination charges are normally not covered by Insurance companies. Presently only Max Bupa allows reimbursement of Vaccination expenses in their Platinum plan.

Cumulative Bonus or No Claim Bonus
In case of Claim free year, many companies reward the customer by either enhancing SI by 5% to 10% for e very Claim Free year, subject to maximum Cumulative Bonus of 50% or by offering 5% to 10% discount on Renewal Premium.
What happens if a person makes a claim – In such case the Cumulative Bonus is reduced by 20% thus it does not become zero, if a person has accumulated 50% Cumulative Bonus, making one claim.

Health Check-up
Most insurance companies reward their customer in case of no claim by offering free Health Check up. Free Health Check is offered for every/two claim free years for one or more family member. Some companies reimburses the expense incurred (subject to limit) on Health check-up while some gets the health check up from their Network Hospital. Max Bupa offers health check up for all the members of the family regardless of claim

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Hospital Room Eligibility in a Health Insurance Policy

Hospital Room Eligibility in a health insurance policy

Hospital Room Eligibility
As mentioned some of the insurance company specify Room Rent Limit of 1% to 2% of SI. Depending of plan chosen, Insurance Companies specify eligibility single room or shared room. Many a times, other charges like Consultation charges, Nursing charges etc are linked to type of room one chose to stay. With advancement in Medical Sciences, selected hospitals are now offering suite for High Networth Individual (HNI)

Most of the Insurance companies do not reward if the insured voluntarily accepts shared room, even though he/ she is entitled for single room. Apollo Munich offers cash incentive in case a person is hospitalised for over 48 hours and chose a shared accommodation.

Presently only Platinum plan of Max Bupa allows suite accommodation, while silver plans allows shared accommodation only.

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How are Pre-Existing Diseases considered for a health insurance policy?

Health Insurance Policy with Pre-Existing Diseases

All the insurance companies provide for coverage for PED after 4th continuous claim free years with same company without break. But no company (except Max Bupa) is ready to cover a person with a history of Bypass operation & Diabetes. Further most of the companies do loading for sub-standard life (i.e. they charge extra premium) for covering person suffering from diseases like BP etc.

At times person while taking of the policy knowingly does not declare PED and assume that after 4 claim free year, same will be covered. However the same can be refused since person has knowingly withheld the information. There are certain illness which are not known at time of taking policy but they existed at time of taking of policy, such cases may be covered by Insurance company.

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Does health insurance has portability?

What is the status of health insurance portability?

Nearly all of us are aware about Portability – thanks to Mobile number portability. Similar to mobile portability, IRDA has asked all Private Insurance Company to introduce Health Insurance Portability w.e.f 1 Jul 2011. Presently only Apollo Munich allows portability of Health Insurance i.e. it will consider Health Insurance of other companies which are running at time of taking/renewing Health Insurance policy from Apollo Munich.

Let us understand what does portability mean. As already explained, when one takes fresh Health Insurance there is warming up period (i.e. waiting period of 0 to 90 days before accepting hospitalization claim due to illness) and there is waiting period of 3 to 4 years for PED. In existing policy insured might have cumulative no claim bonus (NCB). While new guidelines are still awaited, presently Apollo allows you to transfer your existing No Claim Bonus @ of 5% for every claim free year (maximum up to 20% even though you might have accumulated 50% of NCB) and it waive of warming up period (of 30 days). However the waiting period of Pre Existing Disease will remain for minimum one year (even if the policy has remain in force continuously for two years from previous insurer – subject to submission of proof like renewal notice or policy documents). Therefore, in case the policy is enforce for less than 2 years, then PED waiver will start after completing the balance period with Apollo Munich.

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