Introduction
The Insurance Regulatory and Development Authority of India (IRDAI) has directed life and health insurers to implement Bima-ASBA, a new payment mechanism aimed at eliminating unauthorised deductions and delayed refunds. This facility will ensure that policyholders’ funds remain in their bank accounts until the insurance policy is officially issued.
Key Highlights
What is Bima-ASBA?
- Bima-ASBA (Applications Supported by Blocked Amount) allows policyholders to block premium amounts in their bank accounts instead of direct debits.
- The funds are deducted only when the policy is issued, ensuring greater transparency and security in insurance payments.
- The mechanism will be implemented through Unified Payments Interface (UPI), making transactions smoother and more reliable.
Industry Experts on Bima-ASBA
- Jitendra Attra, CFO, SBI General Insurance – Calls it a significant step in enhancing transparency, security, and ease of payments. He emphasized that it prevents unauthorised deductions and delayed refunds, benefiting policyholders who seek a hassle-free payment experience.
- Sanket Gupta, CFO, IFFCO Tokio General Insurance – Compares it to ASBA in IPO applications, stating that it will lead to smoother premium payments and reduce disputes between insurers and customers.
- Indraneel Chatterjee, Co-Founder, RenewBuy – Highlights that Bima-ASBA eliminates uncertainty in premium payments by blocking funds instead of immediate deductions, protecting policyholders’ money in case a policy is not issued.
How Bima-ASBA Works
- IRDAI has introduced UPI One Time Mandate (OTM), which enables users to block funds in their bank accounts for specific transactions.
- Funds remain blocked until the insurer formally accepts the policy proposal and issues the policy.
- Insurers must partner with multiple banks and develop the required systems to ensure smooth implementation.
Conclusion
With the introduction of Bima-ASBA, IRDAI aims to enhance consumer confidence in insurance transactions by ensuring that premiums are only deducted once policies are issued. This initiative brings more transparency, security, and convenience to policyholders, aligning insurance payments with modern digital financial practices.
