How Bima-ASBA improves transparency?
To understand how Bima-ASBA (Applications Supported by Blocked Amount) contributes in improving transparency of life insurance payments, you may first need to know what it exactly is and the way it functions.
Bima-ASBA is a newly introduced payment mechanism for life and health insurances which operates through UPI (Unified payment Interface). This facility in life insurance, mandated by IRDAI has to be included in policy proposals as a payment option. It enables the policy seeker to authorize UPI payment towards the premium during a policy purchase through OTM (one-time mandate). Here the insurer sends a request through its partner bank to block the proposed premium account in the applicant’s bank account until the policy application gets approved. The amount remains blocked for 14 days or till such time the underwriting decision is made whichever is earlier. If the policy is not approved by the insurance company, the funds will be released back into your bank account within one working day.
Also, if the underwriting process gets delayed, the blocked amount gets automatically released after 14 days. Moreover, in case of policy approval, the final premium after underwriting gets debited from the blocked amount. If the final premium is less, the residue amount is refunded to the account while a fresh OTM for debit is required in case it’s higher.
So, how does this process enhance transparency in life insurance payment? Here’s a glance.
- With Bima-ASBA the applicant will be informed at each stage of Bima ASBA i.e. blockage of the amount, initiation of debit and the unblocking of the amount.
- The payment mechanism works through authorization of payment by the policy seeker at every step, thus eliminating the scope of unauthorized payments.
- The authorized amount stays blocked in the applicant’s account, deferring actual payments till the policy approval. This ensures there’s no shortage of fund when the premium payment takes place and helps avoid transaction failures.
- The premium gets debited once the policy gets approved and the applicant is notified of the same by the insurer. In case of policy rejection/cancellation too, the blocked amount gets released within one working day following alerts and instructions of the insurer. In turn, ambiguity regarding policy approval gets minimized as you keep getting the real-time updates.
- Post the underwriting, the final premium amount gets debited from the blocked amount. Residue, if any, is reversed to the account while the policy seeker needs to authorize fresh payments in case of shortfall. This again closes the scope of unauthorized payments or hidden costs.
How to check your payment status in Bima-ASBA?
As per the IRDAI mandate, you can opt for Bima-ASBA for the life insurance payment by filling out a standard declaration form along with the policy proposal. The facility gets active once you accept the blocking request by the insurer to keep the proposed premium amount on hold in your bank account. The newly introduced payment mechanism operates on UPI payment authorisations by the policy applicant and corresponding alerts and instructions.
So how do you check your payment status in Bima-ASBA?
Following the authorisation from the applicant, the Bima-ASBA facility is designed to keep the proposed premium account blocked in your account till the policy approval happens. It gets debited when the policy is approved, released if the policy proposal gets rejected/cancelled, and automatically released if the 14-day waiting period is over. Also, in case of policy approval, it’s the final premium amount determined by the underwriting that gets debited from the blocked amount. In case of shortfall, the applicant has to issue a fresh OTM for the excess payment. Each of these situations is notified to the policy applicant by the insurer through its partner bank and corresponding alerts by the UPI platform. Hence, keeping a check on these alerts providing real-time updates of the application and corresponding debit or refund, you may get an idea of the payment status of your life insurance premium in Bima-ASBA.
Conclusion
The recent IRDAI directive to include Bima-ASBA as a UPI-based payment option in life insurance policy proposals is based on their Master Circular in September 2024 conveying protection of the policyholders’ interest. The insurers have been putting forward requests of enabling one-time mandate of UPI for premium payments.
FAQs
What is Bima-ASBA?
Bima-ASBA (Applications Supported by Blocked Amount) is a payment facility that allows new policyholders to authorize the blocking of funds in their bank account for insurance premium payment. The funds are debited only upon policy issuance, ensuring enhanced security and transparency.
How does Bima-ASBA benefit policyholders?
This mechanism prevents unauthorized deductions by ensuring that the premium amount remains in the policyholder's account until the policy is issued. It enhances transparency and security in premium payment.
Is there a limit to the premium amount that can be blocked using Bima-ASBA?
Bima-ASBA facility can block premiums up to the limit specified by the National Payments Corporation of India (NPCI) from time to time.
How does Bima-ASBA integrate with UPI?
Bima-ASBA utilizes the Unified Payments Interface (UPI) to facilitate the blocking and subsequent debiting of funds for premium payment, ensuring a seamless and efficient transaction process for policyholders.
What happens if the policy application is rejected?
If the policy is rejected or cancelled, the blocked funds are automatically released to the policyholder’s bank account within one working day.
Who can use Bima-ASBA for premium payments?
Any individual purchasing a life insurance policy can use Bima-ASBA, provided their bank supports the facility and they have sufficient funds in their account at the time of application.
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