Buying insurance can be a daunting task due to the sheer volume of information that you have to provide in the proposal form. Worse, you have to repeat the exercise while opening a bank account or investing in a mutual fund, albeit with some differences. To add to the complication, some investments are held in an electronic form and some in the physical form, making it difficult to keep track.
Don't we all wish for a standard procedure for these things, exchangeability of data among the intermediaries and one wallet for storing all our investments? Well, fret not, this could soon become reality. The finance minister has, in the budget, proposed a single operating demat account, uniform know-your customer (KYC) norms and inter-usability of KYC records across financial instruments. At present, financial products have different KYC requirements in terms of format and supporting documents.
"A single KYC policy for all investments is likely to improve the ease of investing in various asset classes," says Anil Rego, CEO & Founder, Right Horizons.
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Your application for a bank account or life insurance with the same set of documents will mean much faster processes. In 2011, the capital market regulator, the Securities and Exchange Board of India (Sebi), had ordered uniform KYC for all Sebi-registered intermediaries. This means that for insurance and banking, separate KYCs are needed. The demat account will also become unified and cover all investments, that is, stocks, mutual funds, bonds and insurance.
This will make processes faster. At present, the demat account is for equities and certain kinds of mutual funds and exchange-traded funds. Now, other financial assets such as insurance and pension products may also be brought under the same account. The idea was conceptualised last year and proposed by the earlier finance minister, P Chidambaram, in the Interim Budget.
The Financial Stability and Development Council, a forum of regulators monitoring financial stability and inter-regulatory coordination, looks into the development of these norms. According to Nitin Jain, CEO of capital markets at Edelweiss, this will make transacting convenient for clients. However, regulatory bodies need to be on the same page for this, he says.
Having said that, this is unlikely to happen overnight considering that this will require exchange of information among all financial sector regulators and creating a common database of investments. KYC norms are mandatory for all investors in mutual funds.