IRDAI Brings Bima-ASBA Facility To Simplify Insurance Payments

By Pune Media On Feb 20, 2025 25

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced the “Bima Applications Supported by Blocked Amount (Bima-ASBA)” facility to streamline premium payments for insurance policies. This initiative, leveraging Unified Payments Interface (UPI), ensures that premium payments are deducted only after an insurer approves a policy, enhancing transparency and security for policyholders.

What is Bima-ASBA?

Bima-ASBA enables policy seekers to authorize a one-time mandate (OTM) via UPI, blocking a specified amount in their bank account for premium payment. The blocked amount remains untouched until the insurer accepts the policy proposal. If the proposal is declined, the funds are automatically unblocked and returned to the customer’s disposal.

This initiative follows IRDAI’s master circular dated September 5, 2024, which mandates that premium payment should only be processed post-approval, with no requirement for advance deposits except where risk coverage begins immediately upon payment.

Key Features and Implementation Guidelines

Mandatory for Insurers: All life and health insurers must implement Bima-ASBA as a premium payment option by March 1, 2025.
Optional for Customers: While insurers must provide this facility, policyholders retain the choice to opt in or out.
No Additional Charges: Customers will not be charged extra fees for using Bima-ASBA.
14-Day Limit: The blocked amount remains on hold for a maximum of 14 days or until an underwriting decision is made, whichever is earlier.
Bank Partnerships: Insurers must partner with multiple banks to ensure smooth transactions and compliance with UPI regulations.
Real-Time Notifications: Prospects receive updates on fund blocking, debiting, and unblocking at every stage.
Immediate Refunds: If the proposal is rejected, the blocked amount is released within one working day.
Risk Begins Post-Acceptance: Insurance coverage starts only upon formal policy approval, regardless of fund blocking.

Regulatory Compliance and Policyholder Safeguards

Insurers must incorporate a standard declaration in proposal forms, allowing prospects to authorize UPI-based fund blocking.
The Life Insurance Council and General Insurance Council will issue standardized declarations within a week to ensure uniform implementation.
Record-Keeping: Insurers must maintain detailed logs of all mandates and make them available for regulatory inspection.
No Hidden Costs: There will be no service fees or deductions associated with blocking or unblocking funds.
Modification Provision: If premium adjustments are required, insurers can modify the mandate once within the 14-day period with the policyholder’s consent.

Why It Matters

This move reflects IRDAI’s push for consumer protection and digital innovation in financial services. While Bima-ASBA brings efficiency and security, its effectiveness hinges on strict compliance by insurers. However, questions remain about its execution—will insurers genuinely adhere to the framework, or will loopholes allow continued misuse? Regulatory enforcement will be crucial to prevent exploitation and ensure that customers truly benefit from this system.

Furthermore, the requirement for insurers to partner with multiple banks raises concerns about uniform accessibility. Smaller insurers with limited banking tie-ups may struggle, potentially leading to disparities in implementation. Additionally, customers unfamiliar with digital transactions may face hurdles in understanding and utilizing the facility effectively.

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