New Delhi: Insurance regulator Irdai has asked life and health insurers to provide Bima-ASBA, a facility wherein a policyholder blocks the amount towards premium in his or her bank account which gets debited only when the policy is issued.
According to Insurance Regulatory and Development Authority of India (Iradi) norms, premium is required to be paid only after the insurer communicates the decision of acceptance of the proposal to customer.
Unified Payments Interface (UPI) One Time Mandate (OTM) feature allows users to block funds in their bank accounts for specific transactions, ensuring availability of funds while deferring actual payments.
With an aim to facilitate smooth transactions of payment of premium, Irdai said UPI-OTM is enabled to be used by insurers.
“Under this facility called the ‘Bima Applications Supported by Blocked Amount (Bima-ASBA), transfer of money from the prospect to the insurer happens only when insurance policy is issued,” it said.
Irdai said that insurers are allowed to use Bima-ASBA mechanism for blocking of premium up to the limit specified by NPCI from time to time.
“Insurers are mandated to offer Bima-ASBA facility to its prospects for life and health insurance policies,” it said and added that currently the facility is being extended to individual policyholders.
Insurers have been asked to go live and offer Bima-ASBA facility by March 1.
The regulator also said insurers should partner with multiple banks and have appropriate systems and process in place.
UPI-OTM service is useful in multiple scenarios where the customer prefers to authorise a block on funds without immediate debits, facilitating smoother transaction processing.
ASBA facility or blocking of funds through UPI is widely used by retail investors in stock market.
