What is Bima ASBA?

Bima ASBA full form : Bima Applications Supported by Blocked Amount, is a new payment mechanism introduced by the Insurance Regulatory and Development Authority of India (IRDAI). Proposed date of implemention from 1st Mar 2025, it aims to simplify premium payments for life and health insurance policies using the Unified Payments Interface (UPI).

What were the challenges? 

Traditional insurance premium payment methods involve upfront payments, which can result in delays in refunds if the policy is rejected, causing financial inconvenience for policyholders. At times Refund process of some Insurance companies becomes a hassle for Individuals.

How will Bima-ASBA help?

BIMA ASBA resolves this issue by blocking the necessary amount in the policyholder's bank account and debiting it only after the policy is approved. This innovative approach fosters trust, streamlines cash flow management, and supports India's push toward digital financial solutions.

Key Features of Bima-ASBA

• One-Time Mandate (OTM): Policyholders authorize a UPI mandate to block the premium amount in their bank accounts. The funds remain blocked until the insurer completes the underwriting process and issues the policy.
• Transparency: The blocked amount is debited only if the policy is accepted. If rejected or canceled, the full amount is refunded within one working day, ensuring no unauthorized deductions
• Maximum Block Period: Funds can remain blocked for up to 14 days or until the insurer makes a decision. While it forces Insurers to complete the underwriting process within 14 days and make a decision. Just in case if the insurer couldn't make a decision within 14days, Amount gets unblocked and the customer has to go through payment process again. 

Example:

Mr.X applies for a ₹20,000 annual premium life insurance policy. Under BIMA ASBA:

Step 1: ₹20,000 is blocked in his bank account

Step 2: Insurer does underwriting

Step 3: If approved, ₹20,000 is debited and the policy is issued to Mr. X

Step 4: If rejected or declined or decision is delayed more than 14 days, funds are automatically unblocked. 

Benefits of Bima ASBA facility

1. Enhanced Security: Policyholders retain control over their funds until policy issuance.
2. Convenience: Eliminates upfront payments and reduces transaction delays.
3. Immediate Refunds: Ensures quick release of funds in case of rejection or cancellation.
4. No Extra Charges: The facility is free of processing fees or hidden costs
5. Interest Accrual: During this period, the blocked funds may continue earning interest, offering financial benefits to policyholders.

Conclusion:

Bima ASBA launched by IRDAI, is a game-changing payment mechanism that simplifies insurance by eliminating upfront payments to insurers and reducing transaction delays. It enhances transparency, security, and convenience for policyholders while ensuring faster refunds and no extra charges marking a significant step toward India’s digital financial future. 

Regards,

Honvest Team.