Mumbai: While the capital market and insurance regulators slug it out over unit-linked insurance plans (Ulips), those selling the product say they’re not too perturbed over which agency has oversight.
In a reversal of their earlier stance, life insurance companies are open to seeking prior approval from market regulator Securities and Exchange Board of India (Sebi) before launching Ulips.
The war between the two regulators has reached the Supreme Court after the finance ministry had to step in to call a truce between the two sides.
At least five private life insurers told Mint that they were not opposed to registering Ulips with Sebi. The life insurers, among the 14 who received Sebi notices, had previously been strongly favouring the Insurance Regulatory and Development Authority (Irda) as the sole regulator for Ulips.
“We do not have any problem in taking Sebi approval for launching Ulips,” the chief executive of a large domestic private sector life insurer said. “We just need to know the modalities if we have to register Ulips with Sebi.”
Ulips are insurance products that invest a part of the premium paid by investors in equity instruments, while another part accumulates as insurance.
“We are just looking for more clarity on the regulation of Ulips, but we do not have any problem with Sebi regulating Ulips,” said the chief executive officer of another private life insurer, which has a joint venture with a foreign firm. “We are ready to comply with the guidelines set by Sebi on Ulips.” All the executives quoted in this story spoke on condition of anonymity.
While the dispute is almost a year-and-a-half old, the row escalated when Sebi sent orders on 9 April to 14 privately held life insurers, banning them from selling Ulips.
Irda hit back immediately, asking the insurers to ignore the order and continue selling Ulips as usual. The insurance regulator, in fact, dubbed Sebi’s action as “misconceived” and said it did not have the authority to pass such an order. Ulips, according to Irda, are essentially insurance products and would continue to be under its jurisdiction.
According to a senior official at one of the fastest growing private sector insurers, firms are now more worried about the final verdict on Ulip regulations rather than the regulatory tussle.
“Irda has already made a number of changes to the norms governing Ulips in recent months and this made us redesign the products. Regulations are meant to enhance transparency and make products investor-friendly,” he said. “We are not worried whether Irda regulates Ulips or Sebi does it, or both. In all cases, norms will keep changing, so we do not have any problem with Sebi regulating us.”
Irda, in its reply to Sebi’s order, had said the ban could lead to a substantial loss to policyholders and insurers, besides destabilising the market. Sebi, which consulted the attorney general before passing its order restricting insurance firms from selling Ulips without its clearance, said the instrument has two parts—investment and insurance, the first of which comes under the capital market’s jurisdiction.
The apex court on Friday issued notices to the Union government and the 14 Sebi-banned life insurers on a petition by the market regulator, seeking transfer of all cases on Ulips from high courts to the highest court.
Two public interest litigation (PIL) suits related to Ulip jurisdiction have been filed so far.
Mumbai-based investor Rajendra Thacker filed one in the Bombay high court, seeking reversal of the Sebi ban. The PIL was filed on the ground that thousands of investors were anxious about their investments due to the Sebi order. Later, Dhruv Kumar, a lawyer and former insurance professional, filed a PIL in the Allahabad high court against Irda, seeking Sebi’s intervention and regulation of Ulips.
The matter is scheduled for hearing in the Supreme Court on 8 July.