Sebi fired a fresh salvo on Sunday in its battle with the insurance regulator, saying it would widen its probe into Ulips, which Irda considers its domain
The Securities and Exchange Board of India (Sebi) has expanded its probe into sale of unit-linked insurance products, or Ulips, to nine more companies, including Life Insurance Corporation (LIC).
Ulips are investment-cum-insurance instruments that are at the centre of the confrontation between the insurance and capital market regulators.
LIC — the country’s largest life insurance company with a market share of 65 per cent — is amongst the nine life insurers which are outside the ambit of the Sebi ban on selling Ulips, announced on Friday.
“The order against other insurance companies, including LIC, will be passed once investigation is complete,” said Sebi Executive Director K N Vaidyanathan.
When contacted, executives at four life insurance companies, including LIC, said they were unaware of any investigation.
However, industry association Life Insurance Council today said insurers would abide by Irda’s direction and would continue business as usual. “The 14 life insurers would continue business as usual,” said Life Insurance Council Secretary General S B Mathur.
The chief executive of a bank-promoted life insurance company, which was not part of the order issued on Friday, said a copy of the Sebi directive was received around 5.30 pm on Saturday. “Since we have not received any notice from Sebi, we are not going to react to it. What we have received is only a copy of the order, probably aimed at preparing us for a similar action,” the CEO said.
On Friday, Sebi had barred 14 of the 23 registered life insurance companies from selling or renewing unit-linked insurance plans (Ulips).
| INSURERS LEFT OUT OF SEBI BAN # LIC # Future Generali India Life # IDBI Fortis # Canara HSBC Oriental Bank of Commerce Life # Sahara Life # Shriram Life # DLF Pramerica Life # Star Union Da-ichi # IndiaFirst |
A day later, Irda Chairman asked the 14 insurers to ignore the order issued by Sebi Member Prashant Saran and carry on with the business as usual.
Irda said it issued the order in public interest and said that the capital market regulator’s directive was misconceived and without jurisdiction.
Sebi has also been citing protection of the interests of the public as the reason behind its move to ask insurance companies selling Ulips to register with it. “If in a combination product, there is an investment component, in any proportion, exposing investors to risks of securities market products, it can be issued only after obtaining registration from Sebi and compliance of the applicable laws with respect to such component,” Saran said in the order.
The order pointed out that in case of one product, the insurance component was limited to 2 per cent and in most Ulips, investment was the dominant theme. “Thus, the argument that insurance is both predominant and inseparable in a Ulip fails,” the order said, while maintaining the investment pattern was similar to mutual funds. Sebi has asked the investment component be registered with and regulated by it.
On its part, Irda said it was open to discussions on the issue but ruled out joint regulation of the product, which accounts for nearly 70 per cent of the industry sales. According to data available with Irda, at the end of March 2009, there were 70.3 million Ulips in force involving a premium of Rs 90,645 crore. Between April 2009 and February this year, another 1.67 million policies were sold, with a premium of Rs 44,611 crore.
A ban on sale and renewal of Ulips sold by all insurance companies will result in the bulk of the Rs 75,000 crore investment in the stock markets being withdrawn, say insurers.
