Insurance cos knock on Irdai door seeking more time to implement Bima-ASBA

The insurance regulator had in mid-February set the March 1 deadline for rollout of the feature, which allows insurers to take a customer's consent and block the premium amount for a period of 14 days

Insurance companies, through the offices of the Life Insurance Council, have approached the Insurance Regulatory and Development Authority of India (Irdai) seeking an extension for implementing Bima-ASBA (Applications Supported by Blocked Amount), said multiple sources aware of the development. A majority of insurers have yet to go live with this feature despite the regulator’s March 1 deadline, these sources told Business Standard.

 

Insurance firms have initiated discussions with Unified Payments Interface (UPI) facility providers to implement Bima-ASBA. While they are working towards rolling out the feature soon, sources said the deadline was too soon, making it almost impossible for most insurers to meet it.

 

While the letter by Life Insurance Council seeking extension from Irdai has not specified any time line, insurance companies are hopeful that the regulator will give them additional time.

 

While insurance companies are mandated to offer this facility, it remains optional for customers.

 

Modeled after UPI-linked ASBA for initial public offering (IPO) applications, Bima-ASBA allows the premium amount to be blocked in the customer’s account until the insurer completes underwriting — which entails evaluating factors such as health, income, and other parameters — before deciding to issue the policy or reject the application.

 

In mid-February, Irdai introduced the Bima–ASBA facility, and made it mandatory for insurers to offer this facility to policyholders by March 1, which gave companies barely two weeks to roll it out to all their customers.

 

In September 2024, Irdai had issued detailed guidelines on protecting policyholders' interests, stating that the premium should be paid only after the insurer communicates its decision on accepting or rejecting the policy proposal. Bima-ASBA was introduced by Irdai to help facilitate the implementation of this rule.

 

With Bima-ASBA, policyholders can use UPI’s One-Time Mandate (OTM) to authorise the blocking of a specified amount (up to Rs 2 lakh) in their bank account.

 

To offer this facility, insurance companies have to partner with multiple banks, set up the necessary systems, and establish contractual agreements. The one-time mandate (OTM) through UPI will have to be created in favour of the insurer and used to authenticate the customer. The mandate will be valid for up to 14 days or until the underwriting decision is made, whichever comes first, in compliance with applicable laws.

 

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

 

Further, 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 prospective customer. 

 

In case the insurer does not process the application within a period of 14 days, the blocked amount will be automatically unblocked through the partner bank by the insurer.

 

Bajaj Allianz Life Insurance said that it had gone live with Bima-ASBA whereby policyholders can opt for UPI’s OTM and authorise the blocking of amounts up to Rs 2 lakh in their bank account via UPI.