Payment of insurance premiums through a unified payment interface (UPI) is now easier, thanks to the Insurance Regulatory and Development Authority (Irdai) notification regarding a one-time mandate for blocking the amount towards premium through a UPI for the issuance of life and health insurance policies.
What Irdai Has Said
Now, users can block funds in their accounts for specific transactions. This ensures that funds are available in the account when setting up a deferred payment. So when a customer wants to make a payment in the future, he can block funds for future payments, making it easier to pay premiums on time.
According to the Irdai circular: “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 for the concerned prospect.”
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Insurers have been mandated to offer this facility for both life and health insurance policies. For this, both life and general insurance councils will have to provide an option in their proposal form within one week of issuance of this circular. The option will allow the insured (prospect) to allow the insurer to block the amount in their accounts through UPI. Bima-ASBA will be an option one can choose. No proposal shall be rejected if the proposer does not opt for Bima-ASBA.
“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,” the circular added. This option will be made available in addition to all the other modes of payment available.
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The prospect will be kept informed throughout the entire process when the amount is blocked, the debit is initiated, and the amount is unblocked, There will be no extra charges for creating such a mandate.
It is important to remember that the given amount will remain blocked and will not be available for any other use till the underwriting decision is made or 14 days, whichever is earlier, and will continue to earn interest.
