INSURANCE
IRDAI allows OTM to block amount through UPI for life, health insurance policies
Feb-19-2025

The Insurance Regulatory and Development Authority of India (IRDAI) has permitted a one-time mandate (OTM) for blocking the amount towards premium through Unified Payments Interface (UPI) for issuance of life and health insurance policies - Bima-ASBA. 

This feature allows users to block funds in their bank accounts for specific transactions, ensuring availability of funds while deferring actual payments. Under the facility called the Bima Applications Supported by Blocked Amount (Bima-ASBA), the transfer of money from the prospect to the insurer happens only when an insurance policy is issued. In this facility, insurers can offer a one-time mandate for blocking a certain amount through UPI in the bank account of the concerned prospect. 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 shall be unblocked and shall be available at the disposal of the prospect.

Insurers have been asked to 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 the Life and General Insurance Councils have to issue a standard declaration within a week from the date of issuance of Irdai’s circular to be included in the proposal for authorisation.

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. Insurance companies have to partner with multiple banks and have appropriate systems and processes in place, along with necessary contractual agreements with partner banks. This is required for the creation of the OTM through UPI only in favour of the insurer and authentication of the prospect through a one-time mandate, as per the applicable provisions and laws, with a valid period of a maximum of 14 days or until the underwriting decision, whichever is earlier.

The amount under Bima-ASBA shall be unblocked automatically after the expiry of 14 days from the initial date of blocking funds, or within one working day from the date of non-acceptance of the proposal form. All insurers shall go live and offer Bima-ASBA facility to customer on or before March 1, 2025.

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