• Source:JND
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Insurance Regulator and Development Authority-IRDA- has asked life and health insurers to offer the Bima-ASBA facility, which allows the policyholder to block the premium amount in his bank account, which is debited only when the policy is issued.

According to the Insurance Regulatory and Development Authority of India (IRDAI), the premium should be paid only after the insurer has informed the customer of its decision to accept the offer.

The Unified Payments Interface (UPI) One Time Mandate (OTM) feature allows users to block funds in their bank accounts for specific transactions, ensuring availability of funds even when the actual payment is deferred.

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"Under this facility called the 'Bima Applications Supported by Blocked Amount (Bima-ASBA), transfer of money from the prospect to the insurer happens only when insurance policy is issued," it said.

With an aim to ensure smooth handling of premium payment transactions, Irda said it has made arrangements for insurance companies to use UPI-OTM. Irda said insurers are allowed to use the Bima-ASBA system to block premiums up to a limit decided by NPCI from time to time.

"Insurers are mandated to offer Bima-ASBA facility to its prospects for life and health insurance policies," it said and added that currently the facility is being extended to individual policyholders.

It has asked insurers to offer Bima-ASBA facilities by March 1.

The regulator added that insurers should partner with multiple banks and implement appropriate systems and processes. The UPI-OTM service is useful in many situations where customers prefer to authorize blocking of funds without immediate debit, thereby facilitating transaction processing.

Blocking of funds through ASBA facility or UPI is widely used by retail investors in the stock market.

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(With Inputs From PTI)