IRDAI Introduces Bima-ASBA Through UPI to Facilitate the Payment of Insurance Premiums
One-Time Mandate (OTM) via the Unified Payments Interface (UPI) is now permitted for insurance businesses by the Insurance Regulatory and Development Authority of India (IRDAI). Policyholders will be able to block money in their bank accounts for particular transactions thanks to this function. According to IRDAI, funds are transferred from the prospect to the insurer only after an insurance policy is issued under the Bima Applications Supported by Blocked Amount (Bima-ASBA) program. With this service, insurers can provide a one-time order to block a specific amount in the concerned prospect's bank account via UPI. It further said that only if the insurer accepts the request will the money for the insurance premium be deducted. The sum will be unblocked and made accessible to the prospect in the event that the insurer rejects the proposal.
Facility is Open for Both Health and Life Insurance
Insurers are required to provide the facility to both life and health insurance policyholders and have been instructed to provide a proposal form to policyholders via a standard declaration in order to block the amount through UPI. To be included in the request for approval, the Life and General Insurance Councils must both release a standard declaration within a week following IRDAI's circular. Additionally, the regulator stated that policyholders who choose not to use Bima-ASBA will not have their bids denied.
According to the circular, insurance firms must collaborate with several banks, have suitable procedures and systems in place, and have the required contracts with partner banks. According to the relevant statutes and legislation, this is necessary for the creation of the OTM by UPI exclusively in the insurer's favour and for the prospect's verification through a one-time mandate. The OTM has a maximum validity duration of 14 days or until the underwriting decision, whichever comes first.
Amount Blocking Cycle
After 14 days have passed after the funds were first stopped, or within one working day of the proposal form's non-acceptance date, the sum under Bima-ASBA will automatically be unblocked. The insurer must use the facility to change the mandate with the prospect's one-time approval or authorisation if the premium to be charged exceeds the banned amount. The insurer will automatically unblock the blocked amount through the partner bank if the application is not processed within 14 days. Customers will have access to this facility by March 1, 2025, at the latest.
Nitin Konde
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