Life insurance companies have sought the intervention of the Insurance Regulatory and Development Authority (Irda) to prevent mutual funds from seeking the Securities and Exchange Board of India’s approval to sell insurance products.
Fund houses, under the aegis of industry body Association of Mutual Funds in India (Amfi) had approached Sebi recently to permit them to sell insurance products to their investors and collect premium from them.
Irda Chairman J Harinarayan has told Business Standard that fund houses that wish to sell insurance products will need a licence from Irda before selling them.
“It is quite clear that anyone who wishes to sell insurance policies has to be licensed under the Insurance Act, which is the law of the land,” said the Irda chief.
“When insurance companies moved to sell unit-linked insurance plans (Ulips), the mutual fund industry was of the view that they (insurers) are not encroaching on their business,” he added.
Fundamentally, Ulips are a different product and have a much longer lock-in period. Secondly, the solvency margin and the financial requirements for an insurance company are much higher than the norms for a mutual fund house and the reverse is not true. Hence, the comparison between the two entities is not valid, said Harinarayan.
Irda is examining the issue of fund houses’ plan to sell insurance products and will take up the matter with Sebi soon, he said.
“At the moment, it is too premature (to take up the issue with Sebi). I am getting the information. We need to get more actual facts. Once we know the issues clearly and what the mutual fund industry is proposing, we will be talking with Sebi,” the Irda chief added.
Life insurers have argued that the present insurance regulations require them to maintain a solvency margin of 150 per cent, which is much higher than the capital requirement norms for fund houses.
