The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a new payment mechanism called BIMA-ASBA (Applications Supported by Blocked Amounts) via Unified Payments Interface (UPI) to simplify premium payments for life and health insurance policies.
An IRDAI circular dated February 18 stated that the new system allows policyholders to block funds in their bank accounts for premium payments, ensuring smooth transactions without immediate debits.
In this Blog, we will explore
- Why is BIMA-ASBA introduced by the IRDAI?
- Key Benefits of BIMA-ASBA
- How does BIMA-ASBA work?
Why was BIMA-ASBA introduced by the IRDAI?
The Insurance Regulatory and Development Authority of India (IRDAI) introduced BIMA-ASBA to enhance transparency and simplify premium payments while safeguarding policyholders’ interests. This move aligns with the Master Circular on the Protection of Policyholders’ Interests issued in September 2024, which outlined key guidelines for premium payments:
Premiums to be paid post-approval only
Insurers must first communicate their underwriting decision. Premiums should be collected only after the policy is approved, ensuring customers pay solely for accepted proposals.
Coverage begins after payment
Risk coverage is activated only upon premium receipt, ensuring there is no confusion about the start of policy benefits.
No upfront deposits required
Insurers are not allowed to collect any deposit at the time of application, unless the policy is issued based on a declaration of good health. This helps avoid under- or over-charging.
Mandatory consent for deductions
Insurers must obtain explicit approval from policyholders before deducting any premium amount from their bank accounts.
Key Benefits BIMA-ASBA
Bima-ASBA streamlines the insurance premium payment experience, offering a secure, transparent, and hassle-free process for policyholders. Here’s how it benefits you:
Seamless Experience
No more worrying about refund delays—if a policy application is declined, the blocked amount is automatically released without the need for any follow-up.
Full Transparency
Your funds stay in your account until the policy is issued, ensuring insurers don’t earn float income. This builds trust and offers complete clarity in the transaction process.
Earn While You Wait
Since the amount is only debited after approval, you continue to earn interest on the blocked funds during the underwriting period, often up to 14 days or more.
Smart Budgeting
Enjoy the flexibility of setting aside the premium amount without immediate deduction, making financial planning and premium payments smoother.
Instant Refunds
In case of policy rejection or cancellation, the blocked funds are released automatically, ensuring a quick and stress-free refund process.
If the Policyholder opts for BIMA-ASBA. How does it work?
Application Process
Suppose a policyholder fills up the life insurance proposal form and selects the BIMA-ASBA option. He provides his UPI ID linked to his bank account to authorize the premium blocking.
Bank Authorization
After submitting the proposal, the policyholder will receive a UPI request from their bank to block the premium amount. Once he approves, the bank blocks the specified amount, ensuring that it remains in his account but cannot be used for other transactions.
Insurer Notification
When the insurance company receives confirmation that the applicant's premium amount is blocked. At this stage, the insurer is assured of payment authorization, though the funds have not yet been deducted.
Underwriting Process
The insurance company begins its underwriting process, reviewing the policyholder's application, documents, and medical reports (if required). This process may take up to 14 days.
Policy Approval & Premium Deduction
If a policy is approved, the insurer instructs the bank to debit the blocked amount. The premium is transferred to the insurer’s account, and the policy is issued.
Policy Rejection Scenario
If the insurer rejects the application based on underwriting criteria, the insurer notifies the bank to release the blocked amount. The funds are unblocked in the policyholder's account without any deductions or delays.
Cancellation Scenario
If the policyholder decides to cancel his application before underwriting is complete, he submits a cancellation request to the insurer. The insurer then instructs the bank to release the blocked amount within one working day.
Bottom Line
The Insurance Regulatory and Development Authority of India (IRDAI) launched BIMA-ASBA to simplify the insurance premium payment process, enhance transparency, and better protect policyholders’ interests.
This initiative is a direct outcome of the Master Circular on Protection of Policyholders’ Interests, issued in September 2024, which emphasized key guidelines for ensuring safe and streamlined premium transactions.
BIMA-ASBA addresses common concerns about delayed refunds, unauthorized deductions, and lack of clarity, ensuring a smoother, more secure experience for every policyholder.
FAQs
Is BIMA-ASBA mandatory for all policyholders?
No, BIMA-ASBA is currently applicable only for new policies that meet specific regulatory criteria.
Does BIMA-ASBA apply to all types of insurance policies?
As per IRDAI guidelines, BIMA-ASBA is currently applicable to Life and Health Insurance policies only.
What is the deadline for insurance companies to comply with Bima-ASBA?
Insurance companies must have their systems ready for BIMA-ASBA implementation by March 1, 2025. From this date, customers should be offered the One-Time Mandate (OTM) option at checkout when applying for a policy.
Can a customer or merchant cancel a mandate after it has been accepted?
Once accepted, the mandate cannot be cancelled by the customer. Only the merchant (insurer) can cancel the mandate if needed.
How is the 14-day expiry of the BIMA-ASBA mandate calculated?
The 14-day validity is set by the merchant during mandate creation and is based on the expiry date parameter, not the exact time of creation. Canceled by the customer. Only the merchant (insurer) can cancel the mandate if needed.
