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The IRDAI has introduced Bima-ASBA (Bima Applications Supported by Blocked Amount), a new UPI-based premium blocking system. Under this system, insurance companies can block the premium amount in customers' bank accounts until policy approval, similar to ASBA in IPO applications. The actual deduction occurs only after the policy is approved by the insurer.
All insurance companies must offer this facility for life and health insurance policies, though it remains optional for customers.
This has come after insurance companies reached out to IRDAI to give relaxation on the new norm in which insurer companies cannot take premium amount before issuing the final policy from April 1, 2025.
Insurers cannot reject proposals if customers choose not to use Bima-ASBA. The blocking period is capped at 14 days or until the final underwriting decision from the insurer, whichever comes first, and no additional charges can be levied for using this facility, said IRDAI.
The insurance regulator clarified that customer protection measures are built into the system. The blocked amount gets automatically unblocked after 14 days if not processed and unblocking must occur within one working day if the proposal is rejected. Insurance companies must keep customers informed at every stage of the process, including blocking, debit, and unblocking. Customers retain the right to cancel their proposal before the underwriting decision.
For implementation, insurance companies must establish partnerships with multiple banks and set up appropriate systems. The UPI mandate can only be created in favour of the insurer and separate Bima-ASBA facilities must be offered for multiple policies. In cases where the premium amount changes after underwriting, the system allows for flexibility - lower premiums will result in partial deduction, while higher premiums can be accommodated through a one-time modification within the 14-day period.
The implementation framework specifies that Bima-ASBA is currently available only for individual policyholders and is subject to NPCI (National Payments Corporation of India) specified limits. All insurers must implement this system by March 1, 2025, said the regulator.