The Insurance Regulatory and Development Authority of India (IRDAI) has directed life and health insurance companies to provide customers with the facility of premium payments through blocked amounts in the bank account.
Under the facility called “Bima Applications Supported by Blocked Amount (Bima—ASBA),” policyholders can ‘block’ the premium amount in their bank accounts. The blocked amount will be automatically deducted as soon as the policy is issued or the premium is due. This process is similar to the amount being ‘blocked’ at the time of application in an IPO, and the money is deducted only after the share allocation.
According to the rules of IRDAI, the insurance company has to first inform the customer about the acceptance of the policy proposal, only after this the premium amount will be deducted from the account.
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Easy payment with UPI OTM
The regulator, in its circular, said that “to facilitate smooth premium payment transactions, insurers are enabled to use a facility of the Unified Payments Interface (UPI) One Time Mandate (OTM) (UPI-OTM).”
This feature allows users to block funds in their bank accounts for specific transactions, ensuring the availability of funds while deferring actual payments. This service is useful in multiple scenarios where the customer prefers to authorise a block of funds without immediate debits, facilitating smoother transaction processing.
Insurers are mandated to offer Bima – ASBA facility to its prospects for life and health insurance policies, IRDAI said.
It further said that insurers will have to provide an option in the proposal form, through a standard declaration, whereby the prospect may authorise the insurer to block the amount in their bank account through UPI. “Both Life Insurance and General Insurance Councils, within one week from the date of issuance of this circular, shall issue a standard declaration to be included in the proposal for taking the authorisation.”
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New IRDAI guidelines applicable from March 1
IRDAI has directed insurance companies to implement this facility by March 1. All insurance companies will have to provide Insurance-ASBA facility for life and health insurance policies.
Apart from this, insurance companies have been asked to partner with many banks and adopt a proper procedure so that this facility is convenient for customers.
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