IRDAI Introduces Bima-ASBA; Simplified Insurance Premium Payments with UPI:

IRDAI Introduces Bima-ASBA; Simplified Insurance Premium Payments with UPI The Insurance Regulatory and Development Authority of India (IRDAI) has launched a new payment system, known as Bima-ASBA. This payment system allows policyholders to save money for their insurance premiums. It is done through UPI (Unified Payments Interface), thus making the payment of premiums easy and convenient. The new system makes it easier to pay for life and health insurance. It lets policyholders set aside money in their bank accounts for premium payments, ensuring a smooth transaction without the amount being deducted immediately. This was announced by IRDAI in a circular on February 18, 2025. According to the IRDAI circular, a new payment system named Bima-ASBA (Bima-Applications Supported by Blocked Amount) will take effect from 1 March 2025. Through this system, the amount of the insurance premium will be frozen in the bank account of the buyer but will only be debited when the policy is issued. Insurers can also provide a one-time UPI mandate, allowing the required amount to be reserved in the buyer’s bank account until the policy is confirmed. This ensures a secure and hassle-free payment process. Launch of One-Time Mandate (OTM) via UPI Customers can allow insurers to block a specific amount in their bank account using UPI when they apply for an insurance policy. The money is debited only after the insurer permits the policy. If the policy is not approved, the blocked amount is released back to the customer. The money stays in the policyholder’s account until the insurance company reviews the application. Once the policy is accepted, the premium will be deducted. If the application is declined, the amount is returned within a working day. The freeze of funds remains for up to 14 days or until a decision Understanding One-Time Mandate Through UPI When someone applies for an insurance policy, they need to fill out a form. This form includes an option that allows the bank to temporarily block the premium amount in their account. The insurance company asks your bank (through its partner bank) to temporarily hold the required amount in your account. Your bank asks for your permission. After you accept, the bank holds the premium amount and notifies the insurance company. Your money stays in your account but is temporarily locked until the insurer decides on your insurance application. It can be blocked for up to 14 days, but you may still earn interest on it. If the insurance company accepts your application, they will inform you and request that the bank deduct the blocked sum and transfer it to their account. If your insurance application is refused or you want to withdraw from it, the blocked sum will be credited to your account with no deductions.