he Future of KYC for Life Insurers

By Frank Roessig – Digital Finance Solutions Lead at Proximus NXT Luxembourg

A recent study shows that approximately two-thirds of the insurance sector has been affected by money laundering and fraud. Criminals are indeed using sophisticated tactics to carry out attacks in this industry, which represents €764 billion in premiums in Europe.

Regulations on anti-money laundering and counter-terrorist financing are becoming increasingly strict. Many authorities, including EIOPA, the FATF, the ESA, as well as national bodies, are publishing numerous regulations related to KYC activities. Regulators require life insurance companies to adopt a risk-based approach (RBA) to establish customer and transaction profiles. These regulations require a questionnaire to be completed with information relating to risks associated with the person, the products, and the distribution channels.

In addition, PRIIPs require a clear classification of the client’s investment profile. As a result, life insurers must ensure compliance while also delivering a seamless customer experience, relying on reliable and efficient tools.

The specificity of life insurance lies in its distribution channels, the people involved in the process, and the characteristics of the products. It is also still widely distributed through intermediary networks. KYC therefore enables the intermediary directly engaged with the customer to collect relevant KYC information in a complete, efficient, and usable way.

From a contractual perspective, several parties are involved and may change over time: the policyholder, the insured person, and the beneficiary or beneficiaries.

Life insurance products also have specific characteristics that can represent sources of risk: single-premium contracts, annuities, repayments, withdrawals, top-ups, portability, policy loans, and more.

While intermediaries—such as bancassurance networks, agents, or brokers—still represent the largest distribution channel, new digital channels are emerging, including InsurTechs, online insurance marketing platforms, and comparison websites. As a result, some intermediaries are strengthening their online distribution capabilities, all under the pressure of productivity and efficiency requirements.