A significant update has been introduced regarding Unified Payment Interface (UPI) transactions. Starting from March 1, 2025, users will gain access to a new feature designed to simplify insurance premium payments. The Insurance Regulatory and Development Authority of India (IRDAI) has granted approval for policyholders to block premium amounts through UPI.
Introduction of Insurance-ASB Feature on UPI
A novel facility known as Insurance-ASB (Application Supported by Block Amount) will be integrated into the UPI system. This feature allows policyholders to reserve funds specifically for their insurance premium payments. The primary goal of this initiative is to enhance the payment experience for both life and health insurance policies, ensuring hassle-free transactions without requiring an instant debit.
How the Fund Blocking System Works
Under this new system, insurance companies can offer a “one-time mandate” to customers, enabling them to block a specific amount in their bank account via UPI. Policyholders can approve the blocking of funds even before their insurance proposal is accepted. The actual deduction of the amount will only occur once the insurance company gives final approval to the policy.
- If the insurance proposal is accepted, the blocked amount is debited.
- If the proposal is rejected, the blocked funds will be released back into the customer’s account.
The funds will remain blocked in the policyholder’s account for a maximum of 15 days, during which the blocked amount cannot be utilized for any other purpose. Despite the blocking, the customer will continue to receive interest on the amount held.
Mandatory Availability of Blocking Feature for Insurers
According to IRDAI’s guidelines, all insurance companies are required to offer this UPI-based fund-blocking facility to their customers. An option will be made available in the insurance proposal form, allowing policyholders to choose whether they wish to permit the insurer to block the premium amount through UPI.
Voluntary for Policyholders
It is important to note that opting for this UPI blocking feature is entirely optional. Policyholders can decide whether or not they want to use this facility. If a customer chooses not to use this feature, it will not result in the rejection of their insurance proposal.
Key Benefits of the UPI Fund Blocking Feature
- Convenient Premium Payment: Simplifies the payment process by securing funds in advance.
- Reduced Payment Failures: Ensures premium payment is ready for automatic debit upon policy approval.
- Interest Retention: Blocked funds continue to earn interest during the 15-day holding period.
- Enhanced Security: Funds are only debited upon policy approval, reducing the risk of unauthorized deductions.
This new UPI feature is set to offer greater convenience and security to policyholders while making insurance premium payments more efficient. For more details, policyholders are advised to consult their respective insurance providers.