On Feb. 18, 2025, the Insurance Regulatory and Development Authority of India notified a circular titled 'One-time Mandate for blocking the amount towards premium through Unified Payments Interface for issuance of life and health insurance policies' to introduce the Bima Application Supported by Blocked Amount.
Insurers have been directed to offer the Bima ASBA option to prospects and policyholders on or before March 1, 2025. This has been done with a view to streamline the premium payment process for life and health insurance policies.
This initiative is aimed at making transactions more efficient and convenient, ensuring a seamless experience for policyholders. Instead of requiring an upfront premium payment at the proposal stage, Bima ASBA will allow policyholders to block the required premium amount in their bank account, which will be debited only after the insurer accepts the underwriting risk and confirms the issuance of the policy.
This initiative of the Irdai is yet another example of the regulator introducing measures in the interests of the policyholder, which in the recent past has included capping premium increase for policies of senior citizens, new surrender value norms, reduced waiting period for pre-existing diseases, and reduced turnaround time for investigation and claim settlement.
Insurers have been directed to offer the Bima ASBA option to prospects and policyholders on or before March 1, 2025. This has been done with a view to streamline the premium payment process for life and health insurance policies.
This initiative is aimed at making transactions more efficient and convenient, ensuring a seamless experience for policyholders. Instead of requiring an upfront premium payment at the proposal stage, Bima ASBA will allow policyholders to block the required premium amount in their bank account, which will be debited only after the insurer accepts the underwriting risk and confirms the issuance of the policy.
This initiative of the Irdai is yet another example of the regulator introducing measures in the interests of the policyholder, which in the recent past has included capping premium increase for policies of senior citizens, new surrender value norms, reduced waiting period for pre-existing diseases, and reduced turnaround time for investigation and claim settlement.
Enabling Regulatory Framework
The rollout of Bima ASBA has been made possible through the regulatory framework provided by the Irdai (Protection of Policyholders’ Interests, Operations and Allied Matters of Insurers) Regulations. The PPHI Regulations introduced a more flexible and forward-looking approach to premium payments, allowing insurers to accept premiums through any mode recognised by the Reserve Bank of India.
By moving away from a restrictive list of permitted payment methods and shifting to an open, RBI-recognised system, these regulations created the necessary foundation for integrating modern, digital-first solutions like Bima ASBA in connection with premium payment. This regulatory shift provided insurers with the operational and legal backing to introduce premium collection mechanisms that prioritize customer convenience and minimize transaction friction.
Taking Cue From IPOs
The concept of ASBA itself has a well-established history in India's capital markets. ASBA was officially introduced by the Securities and Exchange Board of India in July 2008, initially covering select categories of investors such as qualified institutional buyers, non-institutional investors and retail individual investors applying through self-certified syndicate banks.
Following its success, SEBI expanded ASBA's applicability, making it mandatory from January 2016 for all public issues, including initial public offerings. This ensured that investor funds remained in their bank accounts and only debited upon final allotment of securities, eliminating refund delays and enhancing transactional transparency.
In a similar way, Bima ASBA will bring a similar level of security and financial flexibility to policyholders by ensuring that the premium is not deducted until the insurer approves the proposal. If the insurer declines the proposal, the blocked amount will get automatically released, eliminating the need for refunds and unnecessary delays.
With this, insurers will no longer need to manage a high volume of refunds or payment reversals, and a scope of any dispute regarding refunds or payment reversals will get eliminated. With the regulatory enablers provided under the PPHI Regulations, Irdai has been able to introduce a similar customer-centric model in the insurance sector through Bima ASBA, applying the same proven principles of fund blocking and release of payments, tailored specifically for premium payments.
Operational Mechanism, Benefits
The entire process will be digitally enabled through a UPI-based one-time mandate, allowing seamless transaction processing through partner banks. From a contractual standpoint, Bima ASBA process operates through a network of interlinked arrangements amongst policyholders, insurers, partner banks and payment systems.
Policyholders authorise insurers to initiate the blocking of funds through their banks, while the banks, in coordination with the National Payments Corp. and partner institutions, manage the blocking, unblocking and transfer of funds in accordance with Irdai regulations. The insurer is responsible for updating the policyholder at each stage of the process — blocking of funds, underwriting decisions, debit of premium and release of funds in case of non-acceptance.
The partner bank shares details of the mandates with the insurer to ensure accurate reconciliation and tracking. The block is maintained for a maximum of 14 days or until the underwriting decision, whichever is earlier. This will allow policyholders to continue earning interest on such blocked amounts. In case of non-acceptance, the blocked amount will get automatically unblocked within one working day, providing a hassle-free experience for policyholders.
By eliminating the need for upfront payments, avoiding refund-related delays and ensuring a seamless transaction flow, Bima ASBA is set to significantly enhance the insurance purchase experience. With this innovation in payment mechanism, policyholders will gain greater control over their funds while enjoying a smoother and more reliable insurance experience.
Importantly, this facility is offered at no extra cost to policyholders and is available as an optional payment method alongside existing premium payment options. Through Bima ASBA, Irdai has adapted a proven capital market payment mechanism to the insurance sector, introducing a secure, transparent, and digitally-enabled solution that benefits both policyholders and insurers.
With its focus on customer convenience, financial flexibility, and operational excellence, Bima ASBA marks a notable advancement in India's journey towards a modern, tech-driven insurance ecosystem.
Indranath Bishnu is a partner (head-insurance), and Anirud Sudarsan is the principal associate at Cyril Amarchand Mangaldas.
Disclaimer: The views expressed here are those of the authors and do not necessarily represent the views of NDTV Profit or its editorial team.
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