JOIN USLet ULIPs sale continue: FM
The decision to this effect emerged at an hour long meeting Finance Minister Pranab Mukherjee had with the chiefs of the two regulating bodies over the ULIP issue here.
During the meeting it was suggested that both the regulators would maintain status quo with Sebi keeping its order in abeyance till all legal issues over administration of ULIP were resolved.
“Both regulators have agreed to maintain status quo till court decides who can regulate ULIP schemes,” Mukherjee told newspersons after the meeting.
“In order to remove ambiguity and to ensure smooth functioning in the market, the regulators have agreed to jointly seek a binding legal mandate from an appropriate court,” Mukherjee said.
This ad hoc solution was agreed to by Irda Chairman J Hari Narayan and Sebi Chairman C B Bhave after both submitted their representations to the Finance Minister over the ULIP issue. Prior to meeting with Mukherjee both Narayan and Bhave had separate meetings with Finance Secretary Ashok Chawla. ULIPs — a common insurance plan sold by life insurers, where money collected from consumers is invested into equity and debt markets — have become a bone of contention between the two regulators, with both claiming regulatory authority over the scheme.
The tussle was triggered last Friday when Sebi banned 14 life insurance companies from raising funds through unit-linked insurance policies. A day later, Irda asked the companies to ignore the Sebi order and do business as usual. Sebi argues that entities registered with it could operate such schemes as these are in the nature of mutual funds.
Clarity on jurisdiction
On the other hand Irda terming the action of Sebi as “wholly misconceived and without jurisdiction” has said it would have brought the insurance industry to a “stand stil” seriously jeopardising the interests of the policy holders and the interests of the insurers.
It would have resulted in “complete drying up of the revenue flows to the insurance companies which could disrupt the payment of benefits on maturity, on death and on other admissible claims, putting the policyholder and the general public to irreparable financial loss”, Irda said. Hari Narayan, who disclosed that Irda had two rounds of discussion with Sebi but the market regulator did not budge from its position, said existing policy holders “are completely safe, their claims and products are safe. There is no cause for anxiety at all.”
Life Insurance Council Secretary General S B Mathur said “policy holders have got reassurance that a way out has been found out to meet uncertainties and differences of opinions and their interest will be protected so they should be reassured.”
Law firm Link Legal Managing Partner Atul Sharma said it will take a little bit of time to bring clarity on the issue of jurisdiction of Irda and Sebi over ULIPs. “The matter (Sebi order) can be challenged in SAT. The two parties can also sit together to resolve the issue,” he added. The centre of controversy is whether ULIPs are like mutual funds and hence should come under Sebi or are insurance products under Irda’s regulation. ULIPs invest a major chunk funds in stock markets.
About 7.03 crore ULIP policies involving a total premium of Rs 90,645 crore were in force in 2008-09. As many as 16.7 lakh policies were sold with a premium of Rs 44,611 crores during April-February 2009-10.
DH News Service & PTI