Mumbai: The government on Tuesday said it is confident of resolving the row between insurance regulator Irda and market regulator Sebi over who should administer unit linked insurance policies (Ulips).
“We will resolve this issue soon,” finance minister Pranab Mukherjee said at a function here.
The spat between Sebi and Irda broke out in early April, when the capital market regulator banned 14 life insurers from issuing Ulips, which invest heavily in stocks and bonds. A day after, the Irda asked life insurers to ignore the order.
As the impasse continued, the finance ministry directed the regulators to jointly seek legally binding order from appropriate court over jurisdiction of Ulips.
The standoff between the regulators became a subject of ridicule by Deepak Parekh, a key adviser to the government, who said the row had made India a “laughing stock”.
He had also hit out at the government for allowing the capital markets and insurance regulators to go to the court, saying a rethink on their fight over jurisdiction on Ulips would lead to a solution.
Sebi and Irda are yet to see eye-to-eye on regulating Ulips.
The market regulator has filed a petition in the Supreme Court for transferring various petitions against Ulips. The issue of jurisdiction is obliquely referred to in these petitions.
“I understand that Insurance Regulatory and Development Authority (Irda) has taken some very positive steps in respect of regulations of Ulips which are in the interest of both the insurance industry as also the policyholders,” Mukherjee said.
Some of these measures like cap on charges, extending the minimum term of the policy to 5 years, bringing the concept of compulsory annuitization in pension policies and the proposal of fixing the maximum limits of surrender charges have brought in the much needed reforms in the ULIP products, he said.
“I am sure that the insurance industry and Irda would continue to bring in these reforms so that the interest of all the stake holders are secured,” he said.
In order to put more money in the hands of investors, Irda recently said that insurers cannot charge fee on surrender of a unit linked insurance policy after five years.
Insurance companies used to charge a nominal fee to customers to withdraw their unit-linked policies even after expiry of lock-in period.
However, policies withdrawn during the lock-in compulsorily attract a high surrender charge.
Putting stress on spreading awareness about insurance, Mukherjee said one of the important challenges is to generate the required level of awareness about the benefits of insurance to our people particularly living in semi-urban and rural areas.
“It should be our endeavor to take all necessary steps to ensure the reach of insurance to masses,” he said.