New Delhi: The Insurance Regulatory Development Authority of India (Irdai) in a circular issued on Thursday asked life insurers to cease accepting loan repayments against insurance policies made via credit cards. The decision is effective immediately and applies to all life insurers.
There are instances where policy loans are repaid using credit cards and the customer has one month time to repay the credit card dues. This could give rise to opportunities for availing of short-term (1-month) interest-free loans. However, the interest rates on default of repayment of credit cards are very high and in case the customer fails or delays payment of credit cards, this could put the customer to a huge financial exposure. In order to discourage tendencies to use credit cards for above purposes and to prevent policyholder’s vulnerability to financial delinquencies, repayment of Policy loans through Credit cards has been prohibited,” said Conjeevaram Baradhwaj, executive vice president (Legal & Compliance) & company secretary at Future Generali India Life Insurance.