New Rule From March 1: Pay For Insurance Premium Through Blocked Amount On UPI, Mandates IRDAI

New Delhi: Insurance Regulatory and Development Authority of India(IRDAI) has allowed One-time Mandate for blocking the amount towards premium through Unified Payments Interface (UPI mandate) for issuance of life and health insurance policies.

As per the IRDAI latest circular, all insurers shall go live and offer Bima-ASBA facility to the prospect or customer on or before 1 March 2025.

IRDAI's latest circular, issued on 18 February 2025, is made in reference to the Master Circular 'Protection of Policyholders' Interests', it issued on 5 September 2024.

The Insurance regulator said, to facilitate smooth transactions of payment of premium, a facility of the Unified Payments Interface (UPI) One Time Mandate (OTM) is enabled to be used by insurers. This feature allows users to block funds in their bank accounts for specific transactions, ensuring availability of funds while deferring actual payments. 

This service is useful in multiple scenarios where the customer prefers to authorize a block on funds without immediate debits, facilitating smoother transaction processing.

Under this facility called the "Bima Applications Supported by Blocked Amount (Bima - ASBA)" transfer of money from the prospect to the insurer happens only when insurance policy is issued. In this facility, insurers can offer one-time mandate for blocking certain amount through 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 theinsurer does not accept the proposal, the amount shall be unblocked and shall be released and shall be available at the disposal of the prospect.

IRDAI has mandated that Insurers should offer Bima -ASBA facility to its prospects for life and health insurance policies.

Insurers shall provide an option in the proposal form, through a standard declaration, whereby the prospect may authorize 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 standard declaration to be included in the proposal for taking the authorization.

Bima-ASBA shall be at the option of the prospect. No proposal shall be rejected for the reason that the prospect has not opted for Bima-ASBA.

This premium payment facility, Bima-ASBA, shall be offered to the prospects in addition to the existing options available for making payment of premium as specified in Regulation 16 (2) of IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024.

The insurer shall partner with multiple banks and shall have appropriate systems and processes in place and necessary contractual agreements with the partner banks so that:

i. One-time mandate through UPI shall be created:
a) only in favour ofthe insurer.
b) prospect authenticates through one-time mandate, as per the
applicable provisions and laws.
c) with a valid period of maximum 14 days or till the date of the underwriting decision, whichever is earlier.

ii. The amount so blocked under Bima-ASBA shall be unblocked 
a. automatically after the expiry of 14 days from the initial blocking of funds
b. within one working day from the day of non-acceptance of the proposal form

iii. The prospect shall be kept informed at every stage of the Bima-ASBA i.e. blockage of the amount, initiation of debit (whether in part or in full) and the unblocking of the amount so that timely information on blocking and unblocking of funds isprovided to the prospect.

iv. No charges or any additional amount shall be levied for creation of such mandate from the prospect.

V. The partner bank shall share with insurer, the details ofthe One-Time Mandate created in favour of theinsurer, ona monthly basis.