The Insurance Regulatory and Development Authority of India (IRDAI) has unveiled an innovative payment mechanism, Bima-ASBA (Applications Supported by Blocked Amount), set to revolutionize premium payments for life and health insurance policies. Effective from March 1, 2025, this system allows policyholders to block funds in their bank accounts via the Unified Payments Interface (UPI), ensuring a seamless and secure transaction process.

Bima-ASBA enables policyholders to authorize insurers to block a specified amount in their bank accounts through a one-time UPI mandate before the acceptance of an insurance proposal. The key feature of this system is that the premium amount is debited only after the insurer approves the policy. If the proposal is not accepted, the blocked funds are promptly released back to the policyholder’s account. This approach enhances transparency and provides greater control over funds during the policy issuance process.

• Fund Blocking Prior to Approval: Policyholders can block the premium amount in their bank accounts, which remains reserved until the insurer makes a decision on the proposal.
• Conditional Debit Authorization: The blocked funds are debited only upon the insurer’s acceptance of the insurance proposal, ensuring that money is transferred only when a policy is issued.
• Automatic Unblocking: If the insurance proposal is declined, the blocked amount is automatically unblocked and becomes available to the policyholder without any deductions.

To facilitate the smooth adoption of Bima-ASBA, IRDAI has issued specific directives to insurance companies:

• Standard Declaration Form: Insurers are required to provide a standard declaration form to policyholders, enabling them to authorize the blocking of funds through UPI.
• Collaboration with Banks: Insurance companies must establish partnerships with multiple banks and ensure appropriate systems and processes are in place. This includes necessary contractual agreements to create a one-time mandate through UPI exclusively in favor of the insurer.
• Mandate Validity Period: The one-time mandate will have a validity of up to 14 days or until the underwriting decision is made, whichever occurs first. If the insurer does not process the application within this timeframe, the blocked amount will be automatically unblocked.
• Flexibility for Premium Adjustments: In cases where the final premium exceeds the initially blocked amount, insurers must obtain additional consent from the policyholder to modify the mandate accordingly.

The introduction of Bima-ASBA offers several advantages to policyholders:

• Enhanced Control: Policyholders maintain control over their funds, as amounts are only debited upon policy approval.
• Improved Transparency: The process ensures clarity, with funds being blocked and debited based on the outcome of the insurance proposal.
• Simplified Transactions: Utilizing UPI for fund blocking streamlines the payment process, making it more user-friendly and efficient.

The Bima-ASBA initiative aligns with IRDAI’s ongoing efforts to modernize the insurance sector and enhance customer experience. By integrating UPI into premium payment processes, the insurance industry is poised to benefit from increased efficiency, reduced processing times, and improved customer satisfaction.

IRDAI’s launch of the Bima-ASBA system marks a significant milestone in the evolution of insurance premium payments in India. This UPI-based mechanism not only empowers policyholders with greater control and transparency but also signifies a progressive step towards the digital transformation of the insurance industry. As the March 1, 2025 implementation date approaches, both insurers and policyholders are encouraged to familiarize themselves with the new system to fully leverage its benefits.