Missed Premium Payments? How Bima-ASBA Will Prevent Lapsed Policies

For most policyholders, a missed insurance premium payment will result in them losing cover when they need it the most. A fresh move by the Insurance Regulatory and Development Authority of India (IRDAI) seeks to mitigate this risk with the launch of Bima-ASBA, a Unified Payments Interface (UPI) platform where money is kept in the policyholder's bank account until the insurer accepts the proposal for the policy. This ensures that the premium amount is readily available when required, lessening the chances of a policy lapse for want of funds.

What is Bima-ASBA?

Bima-ASBA (Applications Supported by Blocked Amount) is an application facility where insurers can block the premium due amount in the bank account of the customer and apply for a health or life policy. The amount would only be deducted in case the policy is approved by the insurer. In case of non-acceptance by the insurer, then by default the amount that was blocked will be unblocked and ready to use.

As per the IRDAI circular on February 18, 2025, all health and life insurers are required to provide this facility with effect from March 1, 2025. The system would surely enhance payment efficiency and alleviate premium-related disputes.

How Bima-ASBA Prevents Policy Lapses

One of the most common reasons for lapsed insurance policies is non-payment of premiums. Lapsing results in losing the benefits of the policy, and sometimes policyholders have to undergo medical exams and underwriting once more to reinstate the coverage. Bima-ASBA assists in the following ways:

1. Availability of Funds: The premium is reserved while applying for the policy, thus it remains available when necessary.

2. No Advance Payment: There is no advance payment to be remitted by the policyholders before the proposal approval. They have no obligation to wait for reimbursement in the event of proposal rejection.

3. On-Time Payments: The platform allows timely payment when the insurer approves the proposal to avoid unwarranted lapses.

A Step Towards Digital Insurance Payments

Bima-ASBA is part of IRDAI’s larger push toward making insurance more accessible and digitally integrated. The regulator has been working to streamline digital payment processes, and this initiative builds on existing UPI-based transactions that have transformed sectors like retail and banking.

According to the National Payments Corporation of India (NPCI), UPI transactions in India were estimated worth Rs 13.3 billion in January 2025, indicating the magnitude of the usage of digital payments. In view of the fact that Bima-ASBA is biding its time on the UPI platform, the procedure will be a smooth upgrade for existing individuals who are familiar with performing UPI-based transactions.

Challenges and Considerations

Even though Bima-ASBA is poised to make premium payment easier, there are some issues at stake. Existing policyholders will still need to rely on traditional methods since this upgrade is only provided for new policy purchases and not for existing premium payments. Since most policyholders are not fully informed about fund blocking or are worried about access, customer awareness may end up being a hurdle.

Another significant consideration is banking integration, insurers have to work with several banks to create a smooth user experience, which may take some time to get up and running. Overcoming these challenges will prove crucial to the success of Bima-ASBA in reducing policy lapses.

For policyholders, Bima-ASBA is more convenient and transparent. It keeps its policy active without fear of not paying due to lack of money or delay in transactions. IRDAI by adopting UPI in insurance premiums is making insurance easier and more tech-savvy.

Since the system will be operational from March 1, 2025, the insurers and the customers will be keenly observing how this move alters the premium payment and policy lapse reduction in India.