Explained: IRDAI’s diktat on credit cards

The Insurance Regulatory and Development Authority of India (IRDAI) has asked life insurers not to accept repayments for loans against policies if made using credit cards. The purpose seems to be to discourage policyholders from taking on high-cost debt to pay off the lower-cost loans against insurance policies. Such loans are granted by life insurance companies against traditional endowment policies and not pure protection term or unit-linked investment policies (Ulips). While interest rates on credit cards can go up to 44 percent, those on insurance policies are in the range of 9-10 percent. At present, LIC charges an interest of 9.5 percent on loans against its product Jeevan Azad.