Bima-ASBA: Revolutionizing Insurance Premium Payments

Insurance regulator Irdai introduces Bima-ASBA, allowing policyholders to block insurance premiums in their accounts, debited only upon policy issuance. Aligning with evolving digital payment standards, this mechanism leverages UPI-OTM, ensuring funds availability without immediate debits. Insurers must implement this facility by March 1, ensuring seamless transactions.

The Insurance Regulatory and Development Authority of India (Irdai) has unveiled a new mechanism, Bima-ASBA, aimed at streamlining premium payment processes for life and health insurers. This innovative facility leverages the UPI One Time Mandate (OTM) feature, allowing policyholders to block funds in their accounts, which are debited once the insurance policy is issued.

According to Irdai, the premium payment should only occur after the insurer communicates the acceptance decision to the customer. The introduction of UPI-OTM facilitates smoother payment transactions, enabling insurers to use the system for effective premium management within specified limits set by the National Payments Corporation of India (NPCI).

Irdai mandates insurance companies to adopt the Bima-ASBA facility, with a deadline set for March 1. This move requires insurers to collaborate with multiple banks and establish appropriate systems to support the strategy. The practice of fund blocking is familiar to retail investors in the stock market, promising to enhance insurance payment processes.

(With inputs from agencies.)