The Insurance Regulatory and Development Authority (IRDAI) has instructed life and health insurance providers to roll out a new feature called “Bima-ASBA.” With this option, policyholders can reserve their insurance premium amount in their bank accounts. The funds will only be taken out once the insurance policy is officially issued.
So, what’s ASBA all about and how does it function?
Typically, when someone buys insurance, they need to pay the premium upfront. However, with this new insurance-ASBA feature, customers won’t have to pay right away. Instead, the premium amount will be held (blocked) in their bank account, and only if the insurance company approves the application will the money be deducted. If the policy isn’t approved, the funds will stay safe in the account and won’t be taken out.
What’s the deal with UPI-OTM?
UPI-OTM will play a role in the Insurance-ASBA process. UPI-OTM (Unified Payments Interface – One Time Mandate) allows for the temporary blocking of funds in a bank account for a specific transaction. This means the money stays secure in the customer’s account without being debited immediately.
IRDAI mentioned that insurance companies can utilize this feature, making premium payments simpler and more secure.
Benefits of Insurance-ASBA
If the insurance company turns down the application, there’s no need to worry about getting the money back. Plus, customers won’t have to stress about paying upfront.
Money will only be taken out once the policy is received. This option will initially be available to individual policyholders. New regulations will kick in on March 1. All life and health insurance companies will be required to offer the Insurance-ASBA facility. They need to roll out this service by March 1 and will have to collaborate with various banks to set up the necessary system.
So, where is ASBA already in use? This service is popular among stock market investors, allowing them to block funds in their bank accounts for purchasing shares, but the money stays put until the shares are allocated. Now, this same convenience is being introduced in the insurance industry, making it easier for customers to buy insurance without having to pay upfront.