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IRDAI circular on Bima ASBA

IRDAI issued a circular having reference number IRDAI/PP&GR/CIR/MISC/37/02/2025 dated February 18, 2025, titled “One-time Mandate for blocking the amount towards premium through Unified Payments Interface (UPI mandate) for issuance of life and health insurance policies- Bima-ASBA” (“Circular”).

The key highlights of the Circular are as under:

  • The Circular draws reference to the IRDAI Master Circular on Protection of Policyholders’ Interests, 2024, particularly Part A (II) (4) and Part B (II) (3) for Life and Health insurance policies, which specifies that premiums should only be paid after the insurer communicates acceptance of the proposal, and the risk cover will commence only upon premium receipt. Insurers are required to ensure there is no scope for short or excess premium collection and obtain explicit consent from the policyholder for bank account deductions towards premium payment.
  • To ease premium payment processing, IRDAI has introduced the UPI One Time Mandate (OTM), allowing insurers to block funds in a customer’s account for specific transactions, ensuring funds availability while deferring actual payment. This facilitates smoother transactions by enabling customers to authorize a block without immediate debits.
  • Insurers are mandated to offer the “Bima Applications Supported by Blocked Amount (Bima – ASBA)” facility for life and health insurance policies. Under this facility, a certain amount is blocked in the prospect’s bank account via UPI, with the payment being debited only if the insurer accepts the proposal. If the proposal is not accepted, the blocked amount is released and made available to the prospect.
  • Insurers are required to include an option in the proposal form for prospects to authorize UPI-based blocking of the premium amount.
  • The Life and General Insurance Councils shall issue a standard declaration for this within one week from date of issuance this Circular. Bima-ASBA shall be at the option of the prospect, and proposals cannot be rejected for not opting for it.
  • Bima-ASBA shall be offered to the prospects in addition to the existing options available for making payment of premium.
  • Insurers are required to partner with multiple banks and establish the necessary systems, processes, and agreements to facilitate the creation of one-time UPI mandates in favour of the insurer. The mandate shall be authenticated by the prospect, valid for a maximum of 14 days or until the underwriting decision is made, whichever is earlier. The blocked amount will be automatically unblocked after 14 days or within one working day if the proposal is not accepted. Prospects shall be informed at each stage of the process, and no charges will be levied for creating the mandate. Partner banks shall share mandate details with insurers monthly.

Obligation of the Insurers:

    • The premium amount blocked is specific to each proposal form; separate Bima-ASBA shall be offered for each.
    • Blocking occurs only with explicit consent from the prospect.
    • If the blocked amount exceeds the premium, the insurer collects only the reduced amount.
    • If the premium is higher than the blocked amount, the insurer can modify the mandate with one-time consent from the prospect.
    • Mandate modifications are allowed only once, within 14 days of the original blocking.
    • Blocking occurs only after the prospect’s consent as per legal provisions.
    • If the prospect cancels the proposal before the underwriting decision, the insurer shall release the blocked amount within one day.
    • Risk coverage starts only after the proposal is accepted, regardless of the debit.
    • Insurers shall maintain records confirming compliance with Bima-ASBA mandates.
    • Insurers are responsible for any errors or omissions in Bima-ASBA operations.

Procedure for One-time Mandate through UPI:

    • The proposal form shall include a standard declaration for opting into Bima-ASBA, allowing premium amount blocking in the prospect’s bank account.
    • The insurer sends a request to block the premium amount to the prospect’s bank via a partner bank using the NPCI facility.
    • With express consent, the prospect’s bank blocks the amount and notifies the partner bank, which then informs the insurer and the prospect.
    • The blocked amount remains in the prospect’s account without being debited and is unavailable for other uses until underwriting decision or 14 days, earning interest as per bank regulations.
    • The blocked amount is debited only if the insurer accepts the proposal and communicates the decision.
    • Upon acceptance, the insurer instructs the partner bank to debit the premium and transfer it to the insurer’s account.
    • If the proposal is rejected or cancelled, the insurer instructs the partner bank to release the blocked amount, which is unblocked without deduction.
    • If the insurer doesn’t process the proposal within 14 days, the blocked amount is automatically unblocked by the partner bank.
    • Insurers are permitted to use the Bima-ASBA mechanism for blocking premiums up to the limit set by NPCI. Currently, the facility is available only to individual policyholders. All insurers are required to implement and offer the Bima-ASBA facility to prospects or customers by 1st March 2025.

A copy of the Circular is attached for your ready reference.

Source category: IRDAI

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