The Insurance Regulatory and Development Authority of India (IRDAI) has allowed policyholders to set aside funds for premiums through a new payment mechanism called Bima-ASBA (Applications Supported by Blocked Amount) via Unified Payments Interface (UPI).The initiative, which aims to streamline the payment process for life and health insurance policies, allows policyholders to block funds in their bank accounts for premium payments, ensuring smooth transactions without immediate debits, according to a circular by IRDAI on February 18, 2025.
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The new payment mechanism will be effective from March 1, 2025, as per the IRDAI circular. “Under the facility called the Bima-Applications Supported by Blocked Amount (Bima-ASBA), the transfer of money from the prospect to the insurer happens only when an insurance policy is issued. In this facility, insurers can offer a one-time mandate for blocking a certain amount through UPI in the bank account for the concerned prospect,” the circular said.
Introduction of one-time mandate (OTM) via UPI
Customers can authorise insurers to block a specific amount in their bank accounts through the Unified Payments Interface (UPI) before the insurance proposal is accepted. The amount is debited only after the insurer approves the policy. If the proposal is not accepted, the blocked amount is released back to the customer.
Blocking and unblocking of premium amounts
The blocked funds remain in the policyholder’s account until underwriting decisions are made. Upon issuance of the policy, the premium will be debited. If rejected, the amount will be automatically unblocked within one working day. The block is valid for a maximum of 14 days or until the underwriting decision is made.
How a one-time mandate through UPI (Bima-ASBA) works
Opting for Bima-ASBA:
When you apply for an insurance policy, you fill out a form that includes an option to allow your bank to block the premium amount in your account.
Request for blocking funds:
The insurance company sends a request to your bank (through its partner bank) to block the required amount in your account.
Consent & blocking of funds:
Your bank asks for your approval. Once you agree, the bank blocks the premium amount and notifies the insurance company.
Funds remain blocked until decision:
The money stays in your account but cannot be used for anything else until the insurer decides whether to accept your insurance application. It remains blocked for up to 14 days and may still earn interest.
Payment on acceptance:
If the insurer accepts your application, they inform you and request the bank to debit the blocked amount and transfer it to their account.
Refund on rejection or cancellation:
If the insurer rejects your application or if you cancel it, the blocked amount will return to your account without any deductions.
As per the IRDAI circular, “In any case, if the insurer does not process the application within a period of 14 days, the blocked amount will be automatically unblocked through the partner bank by the insurer.”
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