Life insurers to ignore SEBI ban, continue selling ULIPs
12 Apr 2010
Life insurance business association Life Insurance Council today said that insurers will abide by the Insurance Regulatory and Development Authority's direction and would continue business as usual. In other words, the life insurers would ignore the Securities and Exchange Board of India's order banning the issue of fresh unit-linked insurance products or ULIPs.
"The 14 life insurers would abide by the IRDA's direction to continue business as usual," Life Insurance Council secretary-general S B Mathur said when asked if the insurance companies would continue to sell ULIP policies following the regulator IRDA's directions.
Market regulator SEBI had on Friday banned the life insurance companies from raising funds through unit-linked insurance policies, which invest the money collected in equity and debt markets. Insurance sector regulator IRDA, however, rejected the SEBI ban and asked the insurance companies to carry on with business as usual.
Unit-linked equity products (ULIPs) are insurance plans sold by life insurers where the money collected from consumers is invested in equity and debt markets and returns are linked to the same.
In recent years ULIPs have been the best-selling insurance product in the market - accounting for over 50 per cent of the total life insurance business in the country - partly because these products pay hefty commissions to sales people of as much as 40 per cent in the first year. Regulation of ULIPs has turned into a turf war between the two regulatory bodies.
As on 31 March 2009, total funds under the management of life insurance companies stood at over Rs9 lakh crore, according to the Life Insurance Council. The life insurance companies against which SEBI passed the order are SBI Life, ICICI Prudential, Tata AIG, Aegon Religare Life, Aviva Life, Bajaj Allianz, Bharti AXA, Birla Sunlife, HDFC Standard Life, ING Vysya Life, Kotak Mahindra , Old Mutual Life, Max New York Life, Metlife India and Reliance Life.