Why Bima-ASBA’s adoption may be stuck in limbo

Bima-ASBA is a UPI One-Time Mandate (OTM)-based mechanism that allows customers to block their premium amount until the policy is underwritten, much like the ASBA process used in stock market applications.

More than eight months after the Insurance Regulatory and Development Authority of India (IRDAI) set a March 1, 2025,  deadline for insurers to offer Bima-ASBA (Applications Supported by Blocked Amount), only two have actually gone live.

Industry sources and regulatory filings say Bajaj Allianz Life Insurance and ICICI Lombard are the only major insurers to have implemented the mechanism so far, while the rest, including the giants, remain offline.

What is Bima-ASBA?

Bima-ASBA is a UPI One-Time Mandate (OTM)-based mechanism that allows customers to block their premium amount until the policy is underwritten, much like the ASBA process in stock market applications.

It intends to stop unauthorised debits and make premium payments transparent by converting upfront debits into blocked amounts that are released, if a proposal is rejected or debited only after acceptance.

According to IRDAI's circular and guidance, blocked funds should be automatically unblocked if the insurer does not process the proposal within 14 days, which is a consumer-safety feature designed to prevent long, unnecessary freezes on customers’ money.

While early adopters have shown the system can work, insurers continue to grapple with legacy infrastructure, complex bank and UPI integrations and concerns over near-term cash-flow disruption.

So, why the slow uptake?

People close to the matter, speaking to Moneycontrol, point to a cluster of practical obstacles that are harder and costlier to solve than the regulator’s calendar anticipated.

At the top of the list are deep systems integration requirements.

Bima-ASBA requires seamless, near real-time links between legacy policy administration systems, banks, UPI/OTM providers and payment aggregators, so a prospect’s bank balance can be blocked and then unblocked or debited based on underwriting outcomes, sources explained.

Many incumbents, dependent on older core systems, say those links take months of engineering work, testing and multi-party contracts to stabilise.

Independent fintech and payments explainers also note that the change is effectively a platform engineering problem across disparate players.

Regulatory pressure has not erased commercial concerns.

Sources point out that several insurers, particularly larger life carriers with huge new-business volumes, have flagged cash flow and operational risk as real worries. Blocking large volumes of money in customers’ accounts until policies are issued could complicate premium collection cash flows and reconciliation, they say, while the operational burden of managing failed mandates, partial blocks and multiple bank partners increases reconciliation effort and costs.

Industry sources said several insurers have formally sought additional time from IRDAI to implement the framework, but discussions remain inconclusive, with little visible progress or consensus on the way forward.

There also seems to be external frictions.

Banks and UPI providers must onboard insurer flows, agree limits and SLAs (Service Level Agreements) for OTM handling, and build automation for mass unblocking operations. Smaller insurers and distributors seem to worry about integration costs with multiple partner banks and about the customer experience, if the tech is brittle.

Reports also suggest insurers have been engaged in talks with UPI facility providers and the Life Insurance Council to smooth these operational handoffs.

What happens next?

IRDAI has emphasised timelines and the need for insurers to partner with multiple banks, but it has also had to deal with practical implementation feedback from the industry. Sources say regulators and industry bodies are in dialogue to smoothen rollouts and to address teething problems around SLAs, dispute resolution and operational playbooks.

At the same time, they say, adoption will accelerate only after a few more large players complete pilot integrations and live traffic stabilises. This sequence, according to them, could take several months even without formal extensions to the deadline.