SEBI vs IRDA: Where does the ULIP investor stand?

The recent controversial orders from Security and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDA) on insurance companies issuing insurance policies with ULIP have caused quite a fright amongst policy holders.

So who is correct, SEBI or IRDA?

Let’s start of with defining the basic purpose of a ULIP. A Unit Linked Insurance Plan popularly known as ULIP offers you with insurance as well as investment. A part of the premium goes towards the insurance policy and the remaining balance is invested in the funds selected by you.

This is where the SEBI controversy comes into play. According to SEBI, ULIPs falls under the mutual fund category coupled with insurance policy. As per their norms an insurance company has to take their permission before issuing any policy with mutual fund or like mutual fund (read ULIPs).

SEBI has sent out a show cause notice to all insurance companies asking for clarifications in January 2010 as well as December 2009. Taking the matter forward, SEBI recently issued an order to 14 private life insurance companies to stop issuing Unit Linked Insurance Plan. The 14 companies include SBI Life, ICICI Prudential, Reliance Life Insurance, MetLife etc.

What has left a dent in the notice is the exclusion of LIC- the biggest player in the field.

Then came the statement from IRDA adding a different angle to the controversy. The IRDA asked insurance companies to carry on their business as they claim that insurance is their expertise and SEBI does not have any jurisdiction over insurance business matter.

Union finance secretary Ashok Chawla intervened saying that this is an issue that needs to be settled by the two regulators

So where do you figure in the mess?

For existing policyholders as well as new entrants in the field, there isn’t any major concern over your investments. This is a case between two regulators and this doesn’t have any impact over the investment of insurance companies. This isn’t a case of you investments being secure or your insurance companies being safe. It a clash between India’s top two regulators and the fight isn’t likely to end soon. The matter could go to court but it doesn’t have any prejudicial impact on interest of policy holders.

By Ketul Shah

Ketul H Shah is a chartered accountant, has an an MBA and has specialised in banking, finance and insurance. He is passionate about consumer rights and actively offers professional advice on consumer-related matters.Visit his Blog www.askketul.com

- Source : Moneycontrol

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Tags: IRDA, irda india, SEBI, sebi images, ULIP

Category: Personal Finance