Indian insurers defend credit life cover as regulator weighs cutting commissions

what happened

Insurance companies in India have defended credit life policies, which repay a loan to a bank or non-bank lender if the borrower dies, after the regulator proposed sharply cutting commissions on the product. According to a report published by Moody's, which cites Mint, Irdai has proposed capping lender commissions at 2% for single-premium policies and 2.5% for multi-year policies, and barring banks and NBFCs from making insurance compulsory with loans.

HDFC Life, ICICI Life and Canara HSBC Life say the cover protects lower-income borrowers. Irdai's consultation paper says commissions on group credit life rose to about 28% in FY25, with effective payouts reaching about 45% including other remuneration. For some insurers the product is a significant share of premiums, with credit life making up 32.5% of ICICI Life's protection APE in FY26.

why it matters

For insurers, the key question is how much income remains after lower commissions and how sales volumes respond. Canara HSBC expects the cap to end up higher than the proposed 2% and expects lower premiums to support volumes. Critics argue that lenders benefit most from the product, which weakens the case for paying them commissions.

market impact

Indian insurers: lower commissions pressure income from credit life cover

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