The Insurance Regulatory and Development Authority of India (IRDAI) has permitted a one-time mandate for blocking the amount towards premium through Unified Payments Interface (UPI) mandate for issue of life and health insurance policies.
As per the existing norms, no premium deposit/ proposal deposit is required to be paid to the insurer along with the proposal form except in case of policies issued basis declaration of good health where risk cover commences immediately on receipt of premium.
The insurers need to obtain ‘explicit consent’ from the prospect /policyholder for deduction of amount towards premium payment from bank account.
However, based on the representations received by IRDAI from the insurers towards bringing about operational ease in meeting this requirement, to facilitate smooth transactions of payment of premium, a facility of the Unified Payments Interface (UPI) One Time Mandate (OTM) is enabled to be used by insurers, according to a circular.
“This feature allows users to block funds in their bank accounts for specific transactions, ensuring availability of funds while deferring actual payments. This service is useful in multiple scenarios where the customer prefers to authorise a block on the funds without immediate debit from their account facilitating smoother transaction processing,’‘ R K Sharma, Chief General Manager, IRDAI said.
Under the facility – Bima Applications supported by Blocked Amount (Bima – ASBA) – transfer of money from the prospect to the insurer happens only when an insurance policy is issued. Insurers can offer a one-time mandate for blocking a certain amount through Unified Payment Interface (UPI) in the bank account of the concerned prospect.
Amount towards insurance premium will be debited only after the insurer decides to accept the proposal. In case the insurer does not accept the proposal, the amount shall be unblocked, released and available at the disposal of the prospect. Insurers are mandated to offer Bima – ASBA facility to its prospects for life and health insurance policies.
The new facility will only be an additional option for customers in addition to the other modes of payment.