IRDAI Bima ASBA – UPI-Based Payment System for Insurance Premium

In a world where convenience is king, the insurance sector is evolving to keep pace with technological advancements. One such innovation is IRDAI Bima ASBA, a UPI-based payment system for insurance premium payments.  

The Indian insurance industry is set for a significant change in premium payment methods with the launch of Bima-ASBA (Applications Supported by Blocked Amount) regulations by the Insurance Regulatory and Development Authority of India (IRDAI). Beginning March 1st, 2025, insurance companies must reserve the premium amount in the policyholder’s account and will only charge it after the successful completion of underwriting. This shift requires the implementation of UPI One-Time Mandates, affecting the way insurers gather payments from clients.

What is IRDAI Bima ASBA?

IRDAI Bima ASBA (Application Supported by Blocked Amount) is a digital payment method introduced by the Insurance Regulatory and Development Authority of India (IRDAI). It leverages Unified Payments Interface (UPI) to facilitate seamless and secure insurance premium payments.

Bima-ASBA (Applications Supported by Blocked Amount) is a UPI-driven payment mechanism launched by IRDAI, which allows insurance firms to reserve the policyholder’s premium funds in their bank account throughout the underwriting procedure. In contrast to the earlier system, which required insurers to charge the premium upfront—often resulting in adjustments or refunds—this new approach guarantees that the funds stay in the customer’s account until the policy gets approved.

Starting March 1, 2025, Bima-ASBA utilizes UPI One-Time Mandates to reserve the necessary funds in the policyholder’s account during the application process. The blocked sum is deducted only after the insurer finalizes underwriting and delivers the policy. If the application is denied or taken back, the allocated funds are instantly freed.

This system operates like ASBA in IPOs, with funds remaining in the investor’s account until shares are assigned. With Bima-ASBA, the premium is securely held until the insurer finalizes underwriting, providing enhanced transparency and control over payments.

Why Was Bima ASBA Introduced?

The traditional process of paying insurance premiums involved multiple steps, paperwork, and sometimes delays. With digital payments becoming the norm, IRDAI saw an opportunity to simplify premium payments while ensuring enhanced security and transparency.

Bima-ASBA was launched in answer to industry demands for simplifying premium collection while safeguarding policyholder interests. This feature not only streamlines premium payments but also supports IRDAI’s objective of enhancing operational efficiency within the insurance industry.

Key Features of Bima ASBA

1. UPI-Integration – Direct payments from a bank account via UPI.
2. Secure Transactions – Reduces the risk of fraud and unauthorized transactions.
3. Paperless Processing – Eliminates the need for physical paperwork.
4. Real-time Updates – Ensures instant acknowledgment of payments.
5. Seamless Customer Experience – Enables quick and hassle-free premium payments.

How Does Bima ASBA Work?

Step 1: Policyholder’s Application

The customer opts for Bima ASBA while purchasing or renewing an insurance policy. Customer, seeking insurance, submits an application for a life insurance policy with InsureLife Insurance Company. Uncertain if he/she will receive the policy, the customer chooses Bima-ASBA instead of paying the premium in advance, allowing his/her bank to hold the premium amount through UPI.

Step 2: Blocking of Funds

Upon sending the proposal, the customer gets a UPI request from his bank to freeze the premium sum. After the customer’s approval, the bank reserves the designated amount, guaranteeing that it stays in his/her account but is unavailable for other transactions. Instead of deducting money upfront, the requested premium amount is blocked in the bank account.

Step 3: Approval Process

Insure Life Insurance Company verifies that the customer’s premium payment has been blocked. At this point, the customer is guaranteed payment approval, although the amounts have not been withdrawn yet.

Once the insurance provider approves the policy, the blocked amount is debited.  

Step 4: Policy Issuance

After successful payment, the policy is issued, and the insured gets an official confirmation.

If InsureLife denies a customer’s application due to underwriting standards, the insurer informs the bank to unfreeze the blocked funds. The money is released into the customer’s account without any deductions or postponements.

If a customer opts to cancel his/her application prior to finishing underwriting, he/she sends a cancellation request to InsureLife. The insurer subsequently directs the bank to unblock the amount within one business day.

Benefits of Using Bima ASBA for Policyholders

1. No Immediate Debit

Unlike traditional payments, where money is instantly deducted, Bima ASBA only blocks the amount until approval. Policyholders can now rest assured that there will be no delays in refunds if their policy application is denied. The blocked funds are automatically freed, removing the necessity for follow-ups.

2. Eliminates Payment Failures

Since the amount is blocked beforehand, issues like transaction failures due to insufficient funds are avoided. If an application is denied or taken back, the held funds are quickly freed, guaranteeing a seamless and trouble-free process.

3. Enhances Financial Control

Customers can manage their funds better, ensuring they have adequate balance before making payments. As the premium is deducted only upon approval, policyholders earn interest on the held funds throughout the underwriting period, which may last more than 15 days.

4. Increased Transparency

Funds stay in the customer’s account until the policy is issued, preventing insurers from gaining float income. This establishes confidence and offers full transparency regarding the payment procedure. Customers are notified at every stage, making the process more transparent.

Advantages for Insurance Companies

1. Reduced Payment Risks

Since the premium amount is blocked, insurers face fewer issues related to failed or bounced payments.

2. Faster Policy Processing

With seamless and verified payments, insurers can issue policies more quickly.

3. Streamlined Operations

Reduces paperwork and manual interventions, making the process more efficient.

How Bima ASBA Supports Digital India?

Promoting a Cashless Economy

By encouraging digital transactions, Bima ASBA aligns with the Government of India’s Digital India initiative.

Encouraging UPI Adoption

With UPI being the backbone of Bima ASBA, this initiative further strengthens India’s digital payment infrastructure.

Comparing Bima ASBA with Traditional Payment Methods

Challenges and Limitations of Bima ASBA

1. Limited Awareness – Not many customers are aware of this system yet.
2. UPI Dependency – Requires a functioning UPI system and active internet connection.
3. Adoption by Insurers – Some insurers may take time to fully integrate this payment method.

How to Use Bima ASBA for Insurance Payments?

1. Check Insurer Support – Ensure your insurance provider supports Bima ASBA.
2. Register with UPI – Link your bank account with a UPI-enabled app.
3. Select Bima ASBA During Payment – Choose this option while making your insurance payment.
4. Approve Transaction – Authorize the blocking of funds.
5. Wait for Confirmation – The policy will be issued once the payment is approved.

Future of Bima ASBA

With increasing digital adoption, Bima ASBA is expected to become a mainstream payment method for insurance premiums. As more insurers and customers embrace this technology, we can expect further enhancements and integrations.

Conclusion

IRDAI Bima ASBA is a game-changer in the insurance industry, making premium payments more secure, convenient, and transparent. By leveraging UPI, it simplifies transactions while ensuring better financial management for policyholders. As digital payments continue to evolve, embracing solutions like Bima ASBA is the way forward for a seamless insurance experience.

FAQs

1. Is Bima ASBA available for all types of insurance?

Currently, it is being rolled out by select insurers, but it is expected to cover all insurance types soon.

2. Do I need a special app for Bima ASBA?

No, you can use any UPI-enabled banking app for Bima ASBA transactions.

3. Can I cancel my policy after opting for Bima ASBA?

Yes, cancellation policies depend on the insurer, but if canceled before approval, the blocked amount is released.

4. What happens if my bank balance drops below the blocked amount?

The transaction may fail if your account does not have sufficient funds when the final payment is processed.

5. Is Bima ASBA safer than traditional payment methods?

Yes, since it operates within the secure UPI framework, it minimizes fraud risks and unauthorized transactions.

6. Do I have to pay extra charges for using Bima ASBA?

No, there are no additional charges for using this payment method.

7. Which banks support Bima ASBA?

Most major banks in India support UPI-based transactions, including Bima ASBA.

8. Can I use Bima ASBA for group insurance policies?

Yes, as long as the insurer provides this payment option for group policies.

9. What if my payment gets stuck?

In case of issues, you can contact your insurer’s customer service or your bank’s UPI support team.

10. How soon will my policy be issued after payment approval?

Policies are usually issued instantly or within a short processing time after approval.