The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a new payment mechanism called Bima-ASBA (Applications Supported by Blocked Amount) via Unified Payments Interface (UPI) to simplify premium payments for life and health insurance policies.
The new system allows policyholders to block funds in their bank accounts for premium payments, ensuring smooth transactions without immediate debits, an IRDAI circular dated February 18 stated.
The new system, which will enhance convenience and reduce payment-related delays, will be effective March 1, the insurance regulator added.
How does Bima-ASBA work?
Bima-ASBA enables policyholders to authorise insurers to block a specific amount in their bank accounts via UPI before an insurance proposal is accepted. The amount is debited only after policy approval, and if rejected, the funds are automatically unblocked within one working day.
Key features of Bima-ASBA
The funds will remain in the policyholder’s account until the insurer approves or rejects the policy.
No immediate debit: Money is deducted only after policy issuance.
Automatic refund if the policy is not approved.
Maximum block period of 14 days or until underwriting is completed.
How to block your funds in the bank accounts for premium payments
Opting for Bima-ASBA: While applying for an insurance policy, fill out a form that includes an option allowing the bank to block the premium amount in your account.
Blocking funds via UPI: The insurance company sends a request to your bank (through its partner bank) to block the required amount in your account.
Approval & fund hold: The bank seeks customer approval and blocks the amount, which remains untouched.
Premium payment upon acceptance: If the policy is approved, the insurer requests the bank to debit the blocked funds.
Automatic refund on rejection or cancellation: If the policy is declined or cancelled, the amount is unblocked without deductions.