The Insurance Regulatory Development Authority of India (IRDAI) has launched a new payment method- Bima ASBA (Applications Supported by Blocked Amount) via UPI for life and health insurance policies. The policyholders can now set aside the premiums for their life and health insurance policies through this method. Under this new payment method, the insurer can send a one-time mandate to block a certain amount for their insurance policy.

"Customers can block the amount by accepting that mandate. Once the policy is approved by the insurance company, the amount gets debited. The blocked amount stays in the customer’s bank account but they can’t use it for any other purposes," says Naval Goel, CEO of PolicyX.com.

If the policy is not approved by the insurance company, the blocked amount will be released. If there is an increase in the premium amount, the insurer can send a new mandate to the customer.

The UPI mandate is valid for a maximum of 14 days. If there is no action from the insurer side in that period, the funds will be transferred to the customer’s bank account.

"This new payment method will be live from March 1 2025, by all life and health insurance companies. All the other payment methods will be available as earlier. Customers can choose the payment method of their choice," says Goel.

The Bima ASBA is going to be beneficial for both the policyholders as well as insurance companies.

Benefits for policyholders

1. Convenient payment method: Bima ASBA via UPI is a convenient method to make premium payments as a one-time mandate reduces multiple transactions for policy issuance.

2. Secure transactions: Using UPI mandate for premium payments ensures quick, seamless, and secure transactions. Customers can avoid entering payment details multiple times making payments more efficient.

3. Hassle-free refunds: With this payment method, the refund process is simple and hassle-free as the blocked amount is instantly released in case the policy is not approved by the insurer. Other payment methods usually take a few days to process the refund for rejected applications.

4. Enhances transparency and trust: This payment method ensures transparency as transactions are approved with the customer’s consent. As the entire system is regulated by the bank there is no fear of unauthorized or fraudulent transactions.

5. Earn interest income on the blocked amount: The customers can continue to earn interest on the blocked amount as the money lies in their bank account. Other payment methods do not offer this benefit.

Benefits for insurance companies

1. Reduce policy lapse: One of the most common problems for insurance companies is that some policyholders do not complete payment after policy application. With Bima ASBA, the funds are pre-blocked which guarantees policy payment.

2. Easy and fast policy issuance: The policy issuance process will become faster with the UPI mandate as insurers don’t have to wait for payment confirmation.

3. Enhances customer experience: A smooth policy issuance process will enhance the overall customer experience and satisfaction. These customers are more likely to recommend the insurer if the overall experience is good.

4. Reduces payment failure risks: Traditional payment instruments such as credit cards, debit cards, and net banking have higher chances of payment failures. Since the funds are already blocked there is an increased chance of premium collection.

Goel says, "The introduction of Bima ASBA via UPI represents a significant advancement in the life and health insurance sector. It is a step closer towards IRDAI’s goal, ‘Insurance for all by 2047’. By simplifying premium payments, enhancing security, and streamlining the refund process, this innovative method empowers policyholders while simultaneously benefiting insurance companies through reduced lapses and faster policy issuance. The combination of convenience, security, and financial benefits makes Bima ASBA a welcome addition to the available payment options."