Even as they disagreed with the manner in which Sebi went about it, officials of life insurance companies say something like this was needed to shake up Irda. “All is not well starting from the kind of products that are approved by Irda to the way it is sold to the policy holders, high commissions paid to corporate brokers/bancassurance parters in excess of legal stipulation,” a senior official of a life insurer told IANS on condition of anonymity.

“Life insurance is really a long-term business. But what we see and hear is CEOs and marketing managers talking about topline growth, payment to distributors and paying scant respect to interests of policy holders,” another insurer said. Last July, Irda was forced to come out with a regulation for capping charges on ULIPs on the back of Sebi abolishing the entry load on mutual funds. “However, life insurers have come around the regulation by offering the benefit only to policies that are held to maturity. Considering the fact that majority of ULIPs are unlikely to be held till maturity, policyholders will not see any improvement in their value proposition,” an industry official told IANS. Meanwhile, Irda, which had asked life insurers to submit a statement of payment made to bancassurance partners sometime back, is yet to take action on the information it has received.

Warning bells
Had Irda listened to warnings of Reserve Bank of India’s advisory group on insurance regulation in 2001 and also the committee headed by former Chairman of New India Assurance Company Ltd A C Mukherje, life insurers would not be finding themselves in the current predicament.

 The RBI appointed advisory group had indicated the possibility of life insurers engaging in mutual fund operations under the guise of life insurance by incorporating a token life cover in their schemes, and suggested that ULIP to be brought under the definition of life insurance business, in letter and spirit. The advisory group had suggested close co-ordination between Irda and Sebi to have an efficient ULIP business. Citing possibility of life insurers indulging in mutual fund operations, the Mukherjee Committee too had suggested that the insurance regulator should be alive to that risk.
According to an industry official, the turf war would not  have started if only Irda had allowed outsourcing of investment operations or given link to other investment funds.
Indo-Asian News Service