UPI’s new rule effective March 1: You can now pay for premium via blocked amount. Check details | Mint
Source: Live Mint
Insurance regulator 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.
This facility — known as Bima-ASBA (applications supported by blocked amount) — transfer of money from a prospective policyholder to the insurer will take place only after the insurance policy is issued.
Why was this rule announced?
The new directive issued by Insurance Regulatory and Development Authority of India issued via a circular dated Feb 18 is made in reference to a master circular on protection of policyholders’ interests dated Sept 5, 2024, for life insurance policies and health insurance policies where it was conveyed that the premium is meant to be paid only after the insurer gives the decision of acceptance of the proposal.
After this, several representations were received by IRDAI from the insurers towards that it would be better to enable one time mandate of UPI.
What happens in ASBA?
This feature allows users to block funds in their bank accounts for specific transactions, ensuring availability of funds while deferring actual payments.
The amount towards the insurance premium will be debited only after the insurer decides to accept the proposal. In case the insurer does not accept the proposal, the amount will be unblocked and released.
What are insurers supposed to do w.r.t. this rule?
IRDAI has directed that insurers are mandated to offer Bima-ASBA facilities to its prospects for life and health insurance policies.
Insurers will provide an option in the proposal form wherein prospective policyholders may allow the insurer to block the amount in their bank account through UPI.
Is this mandatory?
No, it is not. The circular states that no proposal will be rejected because the prospective customer has not opted for Bima-ASBA. This option will be offered in addition to the existing facilities.
When will it be introduced?
All insurance companies are supposed to offer BIMA-ASBA facilities to their prospective and current customers on or before March 1, 2025.
