The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a new payment mechanism, Bima-ASBA (Applications Supported by Blocked Amount), through the Unified Payments Interface (UPI). This initiative aims to streamline the premium payment process for life and health insurance policies, making it more convenient for policyholders.

What is Bima-ASBA?

Bima-ASBA enables policyholders to block funds in their bank accounts for insurance premium payments, ensuring smooth transactions without immediate debits. As per the IRDAI circular dated February 18, 2025, this mechanism will come into effect from March 1, 2025.

Under this facility, the transfer of money from the prospect to the insurer occurs only when the insurance policy is issued. The one-time mandate (OTM) feature allows policyholders to authorize a specific amount to be blocked in their bank accounts via UPI. If the insurance proposal is accepted, the amount is debited; otherwise, it is released back to the policyholder.

How Does Bima-ASBA Work?

Step-by-Step Process

1. Opting for Bima-ASBA: When applying for an insurance policy, customers can choose to block the premium amount in their bank account using UPI.

2. Request for Blocking Funds: The insurer sends a request to the policyholder’s bank to block the required amount.

3. Consent & Blocking of Funds: Upon receiving approval from the policyholder, the bank blocks the amount and notifies the insurer.

4. Funds Remain Blocked Until Decision: The blocked funds stay in the policyholder’s account and may still accrue interest. The block remains valid for up to 14 days or until the underwriting decision is made.

5. Payment on Acceptance: If the insurer accepts the application, the blocked amount is debited and transferred to the insurer’s account.

6. Refund on Rejection or Cancellation: If the application is rejected or canceled, the blocked amount is released back to the policyholder without any deductions.

Benefits of Bima-ASBA

• Enhanced Security: The funds remain in the policyholder’s account until the insurance proposal is approved, reducing the risk of unauthorized debits.

• Flawless Transactions: Policyholders do not need to make immediate payments; instead, funds are automatically debited upon policy approval.

• Interest Retention: The blocked amount remains in the bank account and may continue to earn interest during the underwriting process.

• Quick Refunds: In case of rejection or cancellation, the funds are automatically unblocked within one working day, ensuring hassle-free refunds.

• Customer Convenience: The process eliminates the need for repeated transactions and enhances the overall insurance buying experience.

With the launch of Bima-ASBA via UPI, IRDAI has introduced a revolutionary step in simplifying insurance premium payments. By enabling a secure and efficient payment mechanism, policyholders can enjoy greater flexibility and ease while purchasing life and health insurance policies. This initiative is set to redefine the way insurance premiums are managed, making the process more transparent and user-friendly.