All You Need to Know About UPI-Linked Bima-ASBA: IRDAI’s New Facility for Simplifying Premium Payments

In this article, we'll explore everything you need to know about UPI-linked Bima-ASBA, how it works, and the benefits it offers to prospective policyholders.

What Is UPI-Linked Bima-ASBA?

UPI-Linked Bima-ASBA is a facility that allows policyholders to authorise premium payments through their UPI-linked bank accounts while keeping the funds blocked until the insurance policy is issued.

This is similar to the ASBA mechanism used in Initial Public Offerings (IPOs), where funds remain in the applicant's account until shares are allotted. They are not transferred to the issuer until the allotment process is completed.

In the case of Bima-ASBA, the premium amount will be blocked in a prospect's bank account until the insurer completes the underwriting process and decides whether to issue the policy or reject the application.

According to the IRDAI circular, "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."

Essentially, you, as an insurance-seeker, would be able to buy an insurance cover without the need to pay the premium before your application is accepted by the insurer.

Note that while it is mandatory for insurers to offer the Bima-ASBA facility to the prospects for life and health insurance policies, customers are under no obligation to avail of the same.

[Read: 9 New UPI Features You Need to Know in 2025]

Furthermore, an insurer cannot reject a proposal simply because the prospect has not opted for Bima-ASBA.

The IRDAI requires insurers to provide this option in the proposal form through a standard declaration. Upon doing so, the prospect may authorise the insurer to block the amount in their bank account through UPI.

The existing options for making premium payments, as specified in Regulation 16 (2) of IRDAI's 2024 guidelines, will still remain in place.

Why Did the IRDAI Introduce Bima-ASBA?

In September 2024, the IRDAI had introduced a Master Circular on the Protection of Policyholder's Interests, specifying the following regarding 'Payment of premium/premium deposit':

• Premium is required to be paid only after the insurer communicates the decision of acceptance of the proposal.

• Risk Cover shall commence only after receipt of premium.

• No premium deposit/ proposal deposit is required to be paid to the insurer along with the proposal form except in case of policies issued basis declaration of good health where risk cover commences immediately on receipt of premium. There should not be scope for either short or excess collection of premiums.

  [Read: Is It Really Worth Buying a Term Life Insurance Policy?]

• Insurers shall ensure that explicit consent is obtained from the prospect/policyholder for deduction of amount towards premium payment from bank account.

Bima-ASBA was introduced in the light of the requests/representations the IRDAI received from the insurers to bring about operational ease in meeting these requirements and simplify the payment of premiums.

[Read: Can You Depend on the Health Insurance Offered By Your Employer?]

How Will Bima-ASBA Work?

As per the IRDAI, the Bima-ASBA facility is extended to individual policyholders at present. Here's how it will work:

1. When applying for an insurance policy, prospects will have an option for allowing their banks to block the premium amount.

2. The insurer will send a request to block the premium amount to the prospect's bank through one of its partner banks, using the facility provided by NPCI.

3. After receiving explicit consent from the prospect, their bank will block the specified amount in their account and notify the partner bank via UPI. The partner bank will then relay this information to the insurer, who will further inform the prospect.

4. The blocked amount will remain in the applicant's bank account without being debited. It will not be available for any other transactions until the underwriting decision is made or 14 days have passed, whichever is earlier. During this period, the amount may continue to earn interest as per applicable banking regulations.

5. The said blocked amount will only be debited from the account if the insurer accepts the proposal and informs the prospect of the decision.

6. Once the insurer approves and underwrites the policy, the insurer will instruct the partner bank to deduct the premium from the blocked amount in the prospect's bank account and transfer it to the insurer's bank account.

7. If the proposal is rejected or the prospect chooses to cancel it, the insurer will instruct the partner bank to release the blocked amount. The prospect's bank will then unblock the funds without any deductions.

8. If the insurer does not process the application within 14 days for any reason, the blocked amount will be automatically released through the partner bank by the insurer.

The IRDAI also outlines obligations of the insurer, including the following:

• The premium amount blocked will be specific to the proposal form submitted by the prospect. If multiple proposal forms are submitted, the Bima-ASBA facility will be provided separately for each.

• The amount will be blocked only after receiving explicit consent from the prospect in the proposal form. If the insurer determines a lower premium than the blocked premium amount after underwriting, only the reduced amount will be collected through this facility.

• If the final premium exceeds the initially blocked amount, the insurer will obtain one-time consent or authorisation from the applicant to modify the mandate accordingly.

• Any modification to the original mandate will be allowed only once. The time period of 14 days will be applicable from the date of the original mandate for blocking the fund.

• If the prospect wishes to cancel the proposal before the insurer makes an underwriting decision, they can submit a cancellation request using the available modes provided by the insurer. The insurer is required to release the blocked amount within one working day of receiving the request.

• If Bima-ASBA is used, the risk shall commence from the date the proposal is accepted, regardless of when the premium is debited from the applicant's account.

• The insurer shall be responsible for any errors or omissions in the usage and operation of the Bima-ASBA facility.

To Conclude...

The introduction of UPI-linked Bima-ASBA offers greater convenience, security, and transparency in insurance premium payments. It ensures that policyholders retain their funds until the policy is formally approved.

The insurance application process often requires the submission of multiple documents, including health check-ups in some cases. The entire process could take 15 or more days. Traditionally, insurance-seekers would have already paid the premium and waited for policy issuance, with their money remaining unused during this time. With Bima-ASBA, the money can continue to earn interest during the waiting period.

Additionally, in case the policy does not go through, prospects can expect faster and hassle-free refunds compared to traditional payment methods.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.