IRDAI grants in-principle approval of OTM on UPI for insurance companies

The Insurance Regulatory and Development Authority of India (IRDAI) has approved the use of a One-Time Mandate (OTM) through the Unified Payments Interface (UPI) for insurance companies. This feature will enable policyholders to reserve funds in their bank accounts for specific transactions. 

Under this initiative, known as Bima Applications Supported by Blocked Amount (Bima-ASBA), the transfer of money from the customer to the insurer will only occur once an insurance policy is issued. Insurance providers can offer a one-time mandate to block a specified amount in the customer’s bank account via UPI for the relevant transaction.

The premium amount for the insurance will be debited only if the insurer agrees to accept the proposal. If the insurer rejects the proposal, the blocked amount will be released and made available to the customer.

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

 

 

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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 favor 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 authorization 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.

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