Winning Bizness Desk

Mumbai. Similar to the IPO process, policyholders can now set aside funds for insurance premiums in their bank accounts. The Insurance Regulatory and Development Authority of India (IRDAI) has approved a new facility called ‘Insurance-ASBA’ through UPI. This facility will be implemented from March 1.

According to IRDAI, under the Insurance-Application Supported by Blocked Amount (Insurance-ASBA) facility, the insurance company will deduct the premium amount from the customer's bank account only when a policy is issued. Insurance companies can request customers to block a specified amount in their bank accounts through UPI for this purpose.

Blocked amount will be released back

If the customer does not accept the insurance company’s offer, the blocked amount will be released back to them. The blocked amount remains in the customer's account but will be freed from restriction within a day. The amount can be blocked for a maximum of 14 days. If the insurance company does not approve the application, the customer will also receive interest on the blocked amount for up to 14 days.

When applying for a policy, customers will need to fill out a form where they can choose the option to approve the blocking of the premium amount. The insurance company will then send a request to the customer’s bank to block the funds. Upon receiving the customer's approval, the bank will block the amount and notify the insurance company accordingly.

Transparency and security to get boost

This initiative aims to enhance transparency and security in the insurance payment process, ensuring funds are debited only after policy issuance. The IRDAI’s move is expected to provide greater convenience to policyholders while streamlining the payment process for insurance companies.