Understanding Bima-ASBA: The Future of Secure Life Insurance Premium Payments

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 blocked amount is then transferred to the insurer’s account if the policy is issued or released if the policy proposal gets rejected.

 

How does Bima-ASBA work for a 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.

1. In the policy application process, there will be an option to select Bima-ASBA and instruct the bank to block the premium amount.
2. Here, the blocking requests will be sent by the insurer through its partner banks under the NPCI (National Payments Corporation of India).
3. 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.
4. 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.
5. 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.
6. 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 applicable premium.
7. If the proposal gets rejected or the purchaser cancels the application, the blocked amount will get released.
8. 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 Life Insurance, 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 has 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.

 

Role of UPI One-Time Mandates (OTM) in Bima-ASBA

Under Bima-ASBA, the UPI One-Time Mandate (OTM) ensures that the insurance premium is blocked safely in the customer’s bank account until the insurer approves the policy. The mandate is created only in favour of the insurer and stays valid for up to 14 days or until the underwriting decision, whichever happens first. During this time, the customer’s money remains secure and can’t be withdrawn by the insurer. If the proposal is declined or not completed within the given time, the blocked amount is automatically unblocked. This process adds transparency and protects policyholders from delays in refunds.

 

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.

1. Under the IRDAI guidelines, insurance companies are supposed to seek an additional declaration from the applicant to provide the Bima ASBA facility.
2. The policy seeker will have to fill out a standard declaration form as a part of the insurance proposal to opt for the facility.
3. 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.
4. The Bima ASBA will get active once the applicant approves the blocking request.

 

Key Takeaways

• Bima-ASBA, effective from March 1, 2025, is a secure way to pay first time life and health insurance premiums through UPI-based fund blocking.
• It lets banks block the premium amount in your account after your consent during the policy application process.
• The blocked amount might earn interest and is debited only after policy is issued
• If the proposal is rejected or delayed, the blocked amount is released back into your account.
• The UPI One-Time Mandate (OTM) ensures safe, transparent fund handling.
• BIMA ASBA is beneficial for policyholders as it eases payments.

 

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.

 

FAQs

 

1. Is Bima-ASBA compulsory for all policyholders?

IRDAI advises that the insurers must offer the Bima-ASBA option for life and health insurance policies, but using it is your choice. You can pay premiums the usual way if you prefer.

 

2. Will the UPI-linked Bima-ASBA facility be available for every insurance policy?

Currently, this facility is available only to new individual life and health insurance policies.

 

3. Can we use the UPI OTM (One-Time Mandate) with RuPay Credit Cards?

Currently, the OTM under Bima-ASBA works only through UPI bank mandates

 

4. For how long will the funds remain blocked under Bima-ASBA?

The blocked amount stays in your account until your policy is issued or for up to 14 days, whichever happens first. If the application is rejected or gets delayed, the funds are released.