What is Bima-ASBA?
Effective from March 1, 2025, Bima-ASBA (Applications Supported by Blocked Amount) is a new premium payment mechanism for life insurance and health insurances. It seeks to authorize one-time mandate via UPI, blocking a specified amount in their bank account for the premium payment. This amount is then transferred to the insurer’s account subject to the issuance of the policy and released if the policy proposal gets rejected.
How does Bima-ASBA work for the life insurance policy?
IRDAI has now mandated all the life insurance providers to include the Bima ASBA facility in the proposal. Here’s how it is designed to work.
- In the policy application process, there will be an option to select Bima-ASBA and instruct the bank to block the premium amount.
- Here, the blocking requests will be sent by the insurer through its partner banks under the NPCI (National Payments Corporation of India).
- Upon the policy applicant’s explicit consent, the bank will block the authorised amount and notify the same to the partner bank through UPI, who will inform the insurer, and in turn will get relayed to the policy applicant.
- The said amount will remain locked in the policy applicant’s account and won’t be available for any other transaction till the insurance underwriting gets completed or 14 days, whichever is earlier. However, the amount may continue to earn interest as per the bank rules in this phase.
- The blocked amount will get debited only when the policy gets issued. Once the underwriting and approval are done, upon the insurer’s instruction, the partner bank will deduct the premium from the applicant’s account and transfer the same to the insurer.
- If the final premium is higher than the blocked amount, a further one-time mandate is created. On the other hand, if the final premium is less than the blocked amount, the remaining is released after deduction of the same.
- If the proposal gets rejected or the purchaser cancels the application, the blocked amount will get released without further deduction as per the instruction of the insurer.
- If there’s no intimation from the insurer about the processing of the insurance application within 14 days, the blocked amount will get released automatically and be available for transactions.
Who can use the Bima-ASBA?
As per IRDAI regulations all life and health insurers have to include the Bima-ASBA option in the policy proposal. Bajaj Allianz Life, in collaboration with its payment partners, has successfully launched this process. As of now, only the individual new policyholders can use it through UPI for their first premium payment. However, the policy applicant have the option to select this new payment mechanism and may opt out if desired. Here you may take note that the blocking can be done for the proposed premium amount up to Rs 2 lakhs.
Benefits of Bima ASBA for policyholders
Earlier, the first online premium payment came with apprehensions of the policy being rejected and the consequent hassle to get back the money. Protecting the policy applicant’s interest, the Bima ASBA mechanism is all set to offer secure and transparent online premium payment. Here’s a look at its benefits
Convenient budgeting:
With no immediate deductions, Bima ASBA enables policy seekers to keep sufficient funds from premium payments, leading to convenient budgeting.
Hassle-free refunds:
In case the policy proposal gets rejected or cancelled or the 14-day period gets over with delayed processing by the insurer, the blocked amount gets automatically released, ensuring a swift and hassle-free refund.
Real-time updates:
The policy applicant keeps getting regular and real-time updates on fund blocking, debit, and unblocking of money as and when they take place.
How to get started with Bima-ASBA?
After learning all about Bima-ASBA you might be looking to secure the first premium payment in your life insurance policy purchase? Getting started with Bima ASBA is a pretty simple process. Here’s a glance.
- Under the IRDAI guidelines, insurance companies are supposed to seek an additional declaration from the applicant to provide the Bima ASBA facility.
- The policy seeker will have to fill out a standard declaration form as a part of the insurance proposal to opt for the facility.
- Following the declaration submitted with the proposal, the insurance provider will send a request to block the premium amount in the applicant’s account through its partner bank via the UPI.
- The Bima ASBA will get active once the applicant approves the blocking request.
Conclusion
As desired by IRDAI, the Bima ASBA facility may offer the policy applicant a smooth and secure premium payment experience with a quick and hassle-free refund in case of the proposal rejection. However, as of now, this facility cannot be accessed for credit or debit card payments and may take longer to get implemented on the ground dealings.
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