Thanks to the UPI-enabled Bima Applications Supported by Blocked Amount (Bima- ASBA) facility, insurance-seekers will soon be able to buy an insurance cover without paying the premium even before their application is accepted. The facility for policyholders, mandated by an Insurance Regulatory and Development Authority of India’s (IRDAI) diktat to insurers to offer IRDAI’s UPI-enabled Bima Applications Supported by Blocked Amount (Bima - ASBA) comes into effect on March 1.
While it is mandatory for insurance companies to offer this facility to its customers, it is optional for the latter.
Modelled on the lines of UPI-linked ASBA for initial public offering (IPO) applications, the premium amount will be blocked until the insurance company completes its underwriting – that is, risk evaluation of the individual’s health, income and other parameters – and takes a call on issuing the policy or rejecting the application.
"Insurers can offer one-time mandate for blocking a certain amount through the Unified Payment Interface (UPI) in the bank account of the concerned prospect. Amount towards insurance premium will be debited only after the insurer decides to accept the proposal. In case the insurer does not accept the proposal, the amount shall be unblocked and shall be released,” the IRDAI said in its circular.
Here’s what customers need to know about the new facility:
What is the purpose of introducing the Bima Applications Supported by Blocked Amount (Bima - ASBA) facility?
The insurance regulator had released detailed rules around protection of policyholders’ interests in September 2024, where it had made it clear that the premium should be paid only after the insurer communicates the decision on accepting or rejecting the policy issuance proposal. Bima-ASBA will facilitate the implementation of this rule.
“While applying for a life insurance policy, the proposer has to make a payment of the applicable premium along with the application. Since the process of purchasing a policy goes through an underwriting process, certain applications are not accepted by the insurance company that are not in line with the prevailing underwriting guidelines of the insurer,” says Rajesh Krishnan, Chief of Operations and Customer Experience, Bajaj Allianz Life Insurance. The company says it has already rolled out the ASBA facility for its customers.
With Bima-ASBA, insurance-seekers can, through UPI’s One-Time Mandate (OTM), authorise the blocking of a specified amount (up to Rs 2 lakh) in their bank account.
How will the facility benefit customers?
The premium amount will be debited from the insurance-seeker's account only after the insurance company decides to issue the policy. Therefore, the customer will not lose out on any interest during the period. The insurance application process may involve submission of numerous documents from customers, in some cases health check-ups too. The process completion could take over 15 days. Meanwhile, the policyholder would have paid the premium and would be waiting for policy issuance, with her money sitting idle during the period. The Bima-ASBA facility solves this problem, says Siddharth Singhal, Business Head, Health Insurance, Policybazaar.com.
How long will the amount be blocked?
Insurers will have to take the call on accepting or rejecting the insurance proposal within 14 days. If the insurer decides to issue the policy, the amount will be debited to the customer's account. Else, it will be released within one working day from the date of rejection by the insurer. If an insurer fails to take a call within 14 days, the amount will get automatically unblocked after this period and stay in the customer's account.
What is the process to be followed to use this facility while applying for an insurance policy?
Instead of the amount being debited for the premium once the customer completes the proposal form, here the required amount will remain in his/her bank account, but will be blocked for up to 14 days. “When customers opt for Bima-ASBA as the payment choice, instead of making an upfront payment, they will authorise the insurer to block the premium amount in their bank account through the UPI One Time Mandate. The amount equivalent to the premium is blocked in the customer’s savings bank account towards premium payment to the insurer,” says Krishnan.
The insurer will have to seek an additional declaration from insurance applicants for the purpose. “The proposal form submitted to the insurer either directly or through the distribution channel shall have duly filled in a standard declaration opting for the Bima-ASBA facility for premium payment which permits blocking of premium amount in the bank account of the prospect,” the IRDAI circular says.
Will this facility be available to all policies?
The IRDAI has directed all insurers to comply with the norms to offer Bima-ASBA facility to its policyholders. However, it may not be possible to buy high-value policies through this route as the maximum ticket size of policies is capped at Rs 2 lakh. “At present, this facility will be available to policyholders who are willing to pay premiums via UPI. That is, you will not be able to access this route if you wish to make the premium payment using debit or credit cards,” says an industry-watcher who did not wish to be named as clarity is yet to emerge on several aspects.
Also read: Investors to gain from ASBA-like mechanism; income of broking firms likely to take a hit
When will insurance companies put the necessary systems in place?
The IRDAI has set a deadline of March 1 for insurers to start offering this facility to prospective policyholders. “All insurers and intermediaries will have to comply with the guidelines. The operational flow will change quite a bit. Tech updates will have to be made. This could take slightly longer to be implemented on the ground,” says an industry official who spoke on condition of anonymity.
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