In India, it is mandatory for all car owners to at least have third-party liability insurance while driving. This will cover them financially and legally from any liabilities caused. Further, the insurers provide the insured with financial and medical help, in case of any damages and losses incurred by them. This service is intended to help the people in need by providing them with adequate help. But, this also leaves them quite vulnerable to fraud and false claims. This is why insurance companies do a complete and thorough background check on all their applicants to know what’s in store for them post the approval of the policy in terms of the risk that they are underwriting.
Why Do We Need Background Checks for Insurance Policies?
When we get into a relationship, either short-term or long-term, we want to know everything about the person we are involved with. The stakes are high and it is only natural for us to want to learn everything about them. Similarly, it is important for the insurer and the insurer to know everything about each other before they sign the policy. This will help both parties make a better and more informed decision. Some of the other reasons why insurance companies conduct background checks on their policyholders:
• It will help the insurance company to confirm the identity of the policyholder and the authenticity of the application.
• This will enable them to provide a better service and overall a better experience for their policyholder.
• The background checks help them prevent fraudulent claims over third-party car insurance and cases of money laundering or other financial frauds.
• The checks also enable insurance companies to determine the premiums of their policyholders by analyzing their previous driving behaviors.
• Also, it will help them know their policyholder’s credit score and understand their behavior in terms of making payments without defaults.
How do the Insurance Companies Conduct their Background Check for Policies?
As mentioned above, a thorough and detailed background check allows insurers to understand their policyholder better and enhance their service. Based on the information they need; insurance companies check a few different parameters. Let us take a look.
Personal Information: The personal information of the applicant helps the insurer to confirm the identity of the policyholder, especially the ones buying a new policy or filing a claim, and ensure that there are no criminal cases in your name. The information helps them avoid cases of identity theft and other cases of potential fraud.
Credit Score: The credit score indicates the financial report of a person. The higher the credit score, the better your chances are of getting a loan or an insurance policy at lower premiums. This will help them determine your discipline in paying your credit bills and overall payment behavior.
Driving Records: There’s nothing that is a better judge of your driving skills like driving records. It will give you a detailed report of your driving behavior indicating your driving habits, offenses, repeat offenses if any. This will sometimes include details of your insured vehicle too like the number of fixtures and repairs done, overall performance and condition, etc.
