Insurance Premium Auto Debit: Now buying an insurance policy has become even easier! The Insurance Regulatory and Development Authority of India (IRDA) has implemented a new facility for life and health insurance companies, in which customers can ‘block’ the insurance premium amount in their bank account. This will auto debit the amount as soon as the policy is issued, making the payment process more secure and easy.
This is how this new insurance payment system will work
This new system implemented by IRDAI will be on the lines of Insurance-ASBA, which is inspired by ASBA (Application Supported by Blocked Amount) used for the IPO application process in the stock market. At the time of insurance application, the customer can ‘block’ the premium amount in the bank account. The insurance company will debit the amount from the account only after accepting the proposal. If the policy is not issued for any reason, the amount will be auto unblocked.
Easy payment of insurance premium through UPI-OTM
Under the Unified Payments Interface (UPI) One-Time Mandate (OTM) facility, customers can ‘block’ the amount in their bank account, which will assure payment but will not cause immediate deduction. Insurance companies can implement a smooth and transparent payment system using UPI-OTM. This will give customers the confidence to pay insurance premium without additional hassles.
New rule mandatory for insurance companies
IRDA has directed all insurance companies to implement Insurance-ASBA facility by March 1, 2025. Under this, insurance companies will have to provide Insurance-ASBA facility to the customers. There will be permission to ‘block’ the premium amount as per the limit set by NPCI (National Payment Corporation of India). Insurance companies will have to partner with many banks, so that this process can be implemented smoothly.
Benefits to customers from IRDA’s move
Secure and transparent payment: Insurance premium will be paid only when the policy is issued, thereby reducing the chances of fraud.
Easy process through UPI-OTM: Customers will be able to keep the funds safe without instant debit.
Faster insurance approval: Insurance companies will find it easier to receive payments, leading to quicker policy issuance.
Better cash flow management: Customers will be able to manage their finances better without immediate deduction of premium.
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