Irdai permits insurance premium payment through blocked amount on UPI

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The Insurance Regulatory and Development Authority of India (Irdai) has allowed One-Time Mandate (OTM) on Unified Payments Interface (UPI) for insurance companies. The feature will allow policyholders to block funds in their bank accounts for specific transactions.

 

“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,” Irdai said.

 

“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,” it added.

 

Insurers have been asked to send a proposal form to policyholders through a standard declaration to block the amount through UPI and have been mandated to offer the facility to both life and health insurance policyholders.

 

Both the Life and General Insurance Councils have to issue a standard declaration within a week of Irdai’s circular to be included in the proposal for authorisation.

 

The regulator also said that policyholder proposals will not be rejected if they do not opt for Bima-ASBA.

 

As per the circular, insurance companies have to partner with multiple banks and have appropriate systems and processes in place, along with necessary contractual agreements with partner banks. This is required for the creation of the OTM through UPI only in favour of the insurer and authentication of the prospect through a one-time mandate, as per the applicable provisions and laws, with a valid period of a maximum of 14 days or until the underwriting decision, whichever is earlier.

 

The amount under Bima-ASBA shall be unblocked automatically after the expiry of 14 days from the initial date of blocking funds, or within one working day from the date of non-acceptance of the proposal form.

 

In cases where the premium to be charged is more than the blocked amount, the insurer will have to use the facility to modify the mandate through one-time consent or authorisation from the prospect. If the insurer does not process the application within 14 days, the blocked amount will be automatically unblocked through the partner bank by the insurer.

 

This facility for customers will go live on or before March 1, 2025.