Simplifying Insurance Payments With Bima-ASBA & UPI-OTM

You must have heard about ASBA in the share market sector. ASBA is used while buying IPOs, the funds are allocated in the prospects bank account, and blocked till the IPO is allocated to the prospect. Money is deducted only when the IPO is allocated to the prospect. Similarly this system will now work in the insurance sector as BIMA-ASBA.

You can now opt for this method of payment at the checkout while purchasing a new insurance policy. This provides a smooth, seamless premium payment. In this article we will understand this payment method in depth along with the new guidelines given by IRDAI.

What is Bima-ASBA?

Bima-ASBA (Application Supported by Blocked Amount) is a new initiative by IRDAI, wherein the prospect can block funds in their bank account for premium payments. These funds will only be debited once the insurance policy is issued to the prospect. This helps in a transparent transaction between the insurer and the prospect, completely eliminate refunding issues, and provide a seamless insurance premium payment.

This method can be opted at the checkout instead of giving upfront payment. The payments will be done with the help of UPI-OTM. This method will only be opted once the prospect confirms through a form with the insurer, the adoption of Bima-ASBA.

What is UPI One Time Mandate (UPI - OTM)?

UPI-OTM (One Time Mandate) is a feature of UPI (Unified Payment Interface) that enables users to allow automated payments for future transactions ensuring account safety and convenience. This method helps with avoiding policy lapses, missing deadlines whilst providing instant refund (unblocking of funds) and reducing fraud.

How Does UPI-OTM Work?

OTM translates to a one time mandate, meaning it requires a one time permission to enable blocking funds for future transactions. Here’s how UPI-OTM works in short:

• Permission: The prospect approves a payment mandate (permission) for a specific amount and duration through their UPI application.

• Blocking of Funds: The specified amount is reserved in the bank account until the payment is due, not deducted directly.

• Automated Debit: As the amount is due, the payment is automatically debited from the prospect’s bank account, without manual approval.

• Expiration or Cancellation: The funds blocked in the account cannot be accessed for a specific period of time or till expiry depending on the payment system associated with OTM, however you still receive all the benefits like interest on the amount as it is not deducted, just reserved. Funds are released immediately if the payment plan is cancelled.

How Does Bima-ASBA Works With UPI-OTM

Bima - ASBA and UPI - OTM work together to simplify the insurance payments. This helps in a simpler, more transparent, hassle free transaction between the insurer and the prospect. Here's how the entire process unfolds:

• Application Process: The process starts with the prospect option for life/health insurance. After filling out the application for the same, he/she has to select payment options. Here they can select bima-ASBA with UPI-OTM. The prospect needs to provide their UPI id for further process.

• Authorization: The prospect will get an authorization request (One Time Mandate) from their dedicated UPI app for the premium payment plan. After approval the process proceeds to the next step.

• Blocking of Funds: Once the prospect authorizes the OTM request, the bank will block the specified premium funds in the prospects account. This amount will not be used for any other transaction.

• Insurer’s Process: Once the bank blocks the amount designated for insurance premium payment, the insurer will be notified. Once the insurer is aware of the funds being blocked, they will start with the insurance process (Medical tests, policy covers, etc.) This process can take up to 14 days.

• Policy Issuance and Premium Deduction: Once the entire process is approved by the insurer, and the policy is ready to be issued, the bank deducts the premium amount that was blocked for the payment. Amount will only be deducted from the bank account upon the underwriting or acceptance of the proposal of the insurer.

In case the insurer rejects the policy or the prospect cancels the proposal before complete examination, the insurer notifies the bank about the cancellation of the deal and the funds are released back into the prospect’s account without any delay.

Benefits of Bima-ASBA and UPI-OTM

The key Benefits of Bima-ASBA and UPI-OTM Include:

• No Need for Upfront Payment: The prospects do not need to pay for the premium upfront, instead they have to only pay the amount once the policy is issued.

• Instant Refunds: In case the policy does not fall through, the prospects do not need to constantly hassle the insurer for refunds, instead the amount is directly released back to their accounts.

• Fraud Prevention: As the payment due will be only after issuance of the insurance policy, fraudulent transactions and unauthorized payments are minimized, assuring security and comfort to both the prospect and the insurer.

• No Deadline Miss: As the payments are automated, remembering the deadline date is out of question. As the underwriting approval is completed by the insurer, the payment automatically is deducted from the bank account and the prospect does not have to be in fear of being defaulted on payments.

• Increased Transparency and Security: The prospect is constantly aware of their funds, as they are blocked in their own account. They get constant updates from the UPI app about when the payment is due, if the policy is issued and approved, and when the payment is deducted from the bank account. As the amount is not deducted until the insurance policy finalizes, the risk of fraud is significantly decreased for both the insurer and the prospect.

New Guidelines by IRDAI on Bima-ASBA and UPI-OTM

The new IRDAI guidelines issued on Bima-ASBA and UPI-OTM, provides a smooth and seamless transaction facility to the prospect and the insurer, ensuring safety from fraud and unauthorized activity. Here are the key highlights from the article.

• The insurer needs explicit consent from the prospect for deduction of amounts towards premium payment from the bank account.
• No Premium deposit is required to be paid along with the proposal forms with the exception of policy based on declaration of good health.
• Insurers are mandated to offer the Bima-ASBA facility to its prospects for health insurance and life insurance.
• This facility is an option, no proposals can be rejected if the prospect does not wish to opt for Bima-ASBA.
• The amount blocked in the bank account cannot be used for any other purpose, until 14 days or acceptance / underwriting of the policy whichever is earlier. After 14 days the funds have to be released back to the prospect account.
• This facility is live and available to all prospects from 1st March 2025.

Final Thoughts

This integration of Bima-ASBA and UPI-OTM aligns with IRDAI’s goal of more transparency, security and being customer-friendly in the digital world. This facility helps and eases out the payment process while purchasing an insurance policy. The customers will be safe from fraud and unauthorized payments done in the name of buying an insurance policy. Contact your insurer to avail this facility at the earliest, as it provides seamless, hassle free insurance payment experience.

Frequently Asked Questions