New Delhi, Oct. 21 -- Insurance companies have defended the need for credit life policies even as the regulator plans to sharply cut commissions on the product that pays off loans when borrowers die.

HDFC Life Insurance Company Ltd and ICICI Life Insurance Ltd said the cover is important for protecting lower-income borrowers. Canara HSBC Life Insurance Co Ltd expects the proposed changes to lower premiums, while acknowledging that it could support volumes.

The Insurance Regulatory and Development Authority of India (Irdai) has proposed capping commissions paid to lenders on credit life insurance at 2% for single-premium policies and 2.5% for multi-year policies. It has also proposed barring banks and non-banking financial companies (NBF...