Insurance Premium Payments Made Easier with UPI-OTM & Bima-ASBA from March 1, 2025

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a significant change in the way policyholders can pay their insurance premiums. Under the new facility called Bima Applications Supported by Blocked Amount (Bima-ASBA), customers can now ‘block’ the required premium amount in their bank accounts. This amount is deducted only when the policy is issued or the premium becomes due.

This mechanism mirrors the Application Supported by Blocked Amount (ASBA) process used for Initial Public Offerings (IPOs), where funds remain in the account but are debited only after share allocation.

How Bima-ASBA Works

Under the Bima-ASBA facility, policyholders can ensure that their premium amount remains available in their bank account but is not deducted immediately. The key features include:

• Blocking of funds: The required premium amount is earmarked in the customer’s bank account.
• Automatic deduction: The amount is debited only after the insurance company accepts the policy proposal and issues the policy.
• Enhanced transparency: Customers are informed about the policy approval before any payment deduction takes place.

This feature ensures that policyholders maintain better control over their funds while ensuring timely premium payments.

UPI-OTM for Seamless Payments

To further simplify premium payments, IRDAI has also enabled insurers to use the Unified Payments Interface – One Time Mandate (UPI-OTM). This facility allows customers to authorise fund blocking for specific transactions without immediate debit. Some key benefits include:

• Convenient payment processing – Funds remain in the account until needed.
• Eliminates the need for manual transactions – The process becomes seamless and automated.
• Greater financial flexibility – Customers can manage their cash flow more efficiently without worrying about immediate debits.

Mandatory Implementation by March 1

IRDAI has directed all life and health insurers to implement Bima-ASBA by March 1, 2025. Additionally, insurers must:

• Partner with multiple banks to ensure smooth execution.
• Provide an option in the proposal form where customers can authorise the blocking of funds.
• Include a standard declaration in the proposal form, as prescribed by Life and General Insurance Councils, within a week of the circular’s issuance.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.