INDIA Trends and Developments Contributed by: Shailaja Lall and Uday Opal, Shardul Amarchand Mangaldas & Co
Bima-ASBA: UPI One-Time Mandate for Proposal- Stage Premium Blocking In February 2025, the IRDAI introduced a notable shift in premium payment processes through its circular on Bima-ASBA (Bima Applications Supported by Blocked Amount) for life and health insurance. The mechanism allows insurers to use a one-time Unified Payments Interface (UPI) mandate to block the premium amount in the customer’s bank account (rather than immedi- ately deducting it) at the proposal stage, ensuring that funds are earmarked while avoiding upfront collection. Under Bima-ASBA, money is transferred to the insurer only if the proposal is accepted. If the insurer declines the proposal, or if the customer withdraws their appli- cation before underwriting is completed, the blocked amount is released to the customer automatically. The mandate is valid for a short window (up to 14 days), the customer receives status updates at every step, and insurers cannot levy any charges for creating the mandate. From a market perspective, Bima-ASBA marks a meaningful shift in how premiums are handled. It aligns the purchase journey with broader consent- based payment architecture, reduces friction around refunds and excess collection, and provides policy- holders comfort that funds are drawn only after under- writing is complete. Goods and Services Tax (GST) Exemption for Individual Life and Health Insurance With effect from 22 September 2025, a significant tax reform was introduced for the insurance sector, with the GST rate on all individual life insurance and individual health insurance policies, including reinsur- ance of the same, reduced from 18% to zero. The exemption is limited to individual policies. Group life and group health insurance products fall outside this benefit and will continue to attract GST at the prevail- ing applicable rate (ie, 18% at present). The GST exemption represents a targeted fiscal measure that directly reduces the cost of insurance for individual policyholders and incentivises the growth of these segments.
Beyond the notable amendments made in December 2025, we outline below other key developments shap- ing the insurance sector. Digitalisation, Data Governance and Payments In January 2025, the IRDAI notified the IRDAI (Main- tenance of Information by the Regulated Entities and Sharing of Information by the Authority) Regu- lations, 2025 (“Regulations”), which consolidate and streamline the framework governing how information is maintained, secured and shared across the insur- ance ecosystem. Under the Regulations, insurers, intermediaries and insurance intermediaries must maintain complete, accurate and minimum specified information in elec- tronic form, supported by appropriate data govern- ance, security and confidentiality safeguards. Further, all policies and claims records pertaining to Indian business must be stored within India in secure and compliant data centres. The Regulations also specify detailed obligations for record retention, board-approved policies on record maintenance and destruction, and access for regula- tory inspection and investigation. Importantly, in July 2025, the IRDAI issued a clarifica- tory circular: • to address the application of the record-mainte- nance requirements to Foreign Reinsurers’ Branch- es and Lloyd’s India (including its syndicates and service companies); and • to clarify that where such entities collect insurance records in the course of their operations, all such records are required to be maintained in India, and that this requirement applies to every record, including records maintained in electronic form. The Regulations align with the legislative direction subsequently reflected in the Amendment Act, which expressly strengthens the statutory framework relat- ing to the maintenance, processing, accuracy, secu- rity and confidentiality of policyholder information, and codifies requirements for comprehensive maintenance of policy and claims records and regulated processing of KYC and solicitation-related information.
219 CHAMBERS.COM
Powered by FlippingBook