Why payment hassles can affect your life insurance?
To get a life cover and ensure financial protection for the loved ones, one needs to purchase the life insurance policy and keep it active through regular and on-time premium payments. In traditional payment methods,before September 2024, the premium was to be paid before the policy approval. As per the Master Circular on Protection of Policyholders' Interests, 2024 , premium is needed to be paid only after the approval of the policy. To simplify the payment for policy seekers, IRDAI has issued Bima-ASBA, to give seekers payment options.
How Bima-ASBA works
As specified in the September 2024 Master Circular by IRDAI, the newly introduced Bima-ASBA payment mechanism is a facility to allow the policy seeker to authorise UPI payments towards their first life insurance premium payment. Under this mechanism, the premium amount stays blocked in the policy seeker’s bank account via Unified Payment Interface (UPI) until the policy gets approved and gets debited only after the seeker is notified of the same. Here, the insurance company decides the final premium based on the insurance underwriting, and the debit is made accordingly. On the contrary, if the policy gets rejected or cancelled, or a 14-day waiting period for insurance underwriting gets over, the blocked amount is released, within one-working day ensuring a smooth refund. In accordance, the policy seeker also gets regular and real-time updates of the blocking and unblocking of the fund and the status of the policy application, based on which the payment authorisations take place.
Step by step guide to enabling Bima-ASBA
As per the IRDAI mandate, Bima-ASBA is a compulsory addition to the payment method options offered by the insurer. However, the policy seeker can choose to avail of the same or refrain from it. Currently, this new payment mechanism is accessible only through UPI-OTM for first premiums. Here’s a step-by-step guide to enabling Bima-ASBA that you can follow.
Procedure for opting BIMA-ASBA via One-Time Mandate (OTM) through UPI
The BIMA-ASBA process simplifies insurance premium payments by allowing policy applicants to block the required amount in their bank accounts until the policy is approved. The steps for setting up BIMA-ASBA via OTM through UPI are as follows:
Opting for BIMA-ASBA
While submitting the insurance proposal form (directly or via an intermediary), the policy applicant must select the BIMA-ASBA option for premium payment, if they wish to opt for it. A standard declaration form must be filled out to authorize the blocking of funds in their bank account.
Request for Blocking Funds
The insurer will send a request to the policy applicant’s bank (through its partner bank) to block the premium amount. This request is processed via the National Payments Corporation of India (NPCI) UPI framework.
Consent and Fund Blocking
Once the policy applicant provides explicit consent, their bank will block the specified amount in their account. The partner bank will then inform the insurer about the blocked funds, ensuring transparency in the transaction.
Premium Payment Processing
The blocked amount remains in the policy applicant’s bank account without being debited until the insurer completes the underwriting process. If the policy is approved, the insurer instructs the bank to debit the premium amount and transfer it to the insurer’s account.
Refund in Case of Rejection or Cancellation
If the insurance proposal is rejected or canceled, the insurer directs the partner bank to release the blocked funds. The policy applicant’s bank will then unblock the full amount without any deductions.
Automatic Unblocking for Delayed Processing
If the insurer does not complete the underwriting process within 14 days, the blocked funds will be automatically released back into the policy applicant’s account within one working day. This process enhance transparency and financial security.
Tips to maximize Bima-ASBA for a seamless experience
IRDAI has introduced Bima-ASBA to provide policy seekers with a smooth, transparent and easy payment experience for a life insurance purchase. The new payment mechanism is designed to address the possible hassles that one may face while paying through traditional methods and secure the policyholder’s interest. But as a policy seeker, you may also need to do certain things to ensure a seamless experience. Here are some tips.
- Choose paying for your premiums through UPI and remember to select the Bima-ASBA option in your policy proposal.
- Keep sufficient funds in your bank account that can be blocked for the premium payment following the policy approval.
- Provide explicit consent for blocking the premium amount and the consequent automated debit.
- Keep a check on regular updates of blocking money, the timeline of underwriting, policy approval and issuance or rejection/cancellation, corresponding debit or release of the blocked amount, and refund of excess amount, if any.
- In case you prefer to cancel the policy proposal, notify the Insurer by making the request through the various modes provided for this purpose. Insurer will then release the blocked amount within one working day from the day of request.
Conclusion
Bima-ASBA is one of IRDAI’s attempts to foster digital insurance payments and align with the protection of the policyholders’ interest. As the reliance on UPI payments continues to grow, the National Payment Corporation of India (NPCI) records UPI transactions in India worth Rs 13.3 billion in January 2025. Leveraging this, Bima-ASBA is expected to bring a smooth upgrade in life insurance purchases.
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