Health-Life Insurance: The Insurance Regulatory and Development Authority of India (IRDAI) has launched a new initiative designed to enhance the premium payment experience for holders of health and life insurance policies. This initiative enables policyholders to reserve the necessary funds in their bank accounts, thereby minimizing payment delays and increasing convenience.
How does this new system work?
How does this new system function? As outlined in the circular released by IRDAI on February 18, during the premium payment process, a specified amount will initially be reserved in the bank account. If the policy receives approval, the amount will be automatically deducted from the account. Conversely, if the policy is declined, the reserved amount will be refunded in full without any deductions. This system is set to be implemented starting March 1, aiming to streamline the process of purchasing insurance policies and paying premiums, making it more transparent and straightforward.
Know how it functions
What is the Insurance-ASBA system and how does it operate? The Insurance-ASBA (Application Supported by Blocked Amount) system allows insurance customers to temporarily reserve funds from their bank accounts via UPI. Upon submitting an insurance application, the specified amount will be blocked with the customer’s consent. The funds will only be deducted once the insurer approves the policy. Should the insurance application be rejected, the blocked amount will be released automatically within one business day. The funds remain secure in the customer’s account until the insurance company grants approval. If the policy is not approved for any reason, the premium amount is refunded to the customer without any deductions.
This system effectively reduces payment delays and ensures a smooth experience for policyholders. The reserved amount can be held for a maximum of 14 days or until the underwriting process is finalized. If the policy is approved within this timeframe, the payment will be processed automatically.
Upon the customer’s approval, the bank will reserve the specified amount. This amount will be automatically deducted if the policy is approved; however, if the policy is declined, it will be returned to the customer’s account.
Advantages
This new system will enhance the convenience of purchasing insurance and processing payments. Customers will experience alleviation from payment-related issues, while insurance companies will benefit from a streamlined and transparent payment process.