SEBI bars 14 companies from selling Ulips

In a move that is bound to worsen tension, insurance watchdog IRDA and market regulator SEBI have banned 14 private life insurance companies from offering unit-linked insurance pans without its approval.

According to analysts, the move could be expected to lead to court battles. They say it is unfortunate that the matter has been allowed to reach this stage and it was time the finance ministry intervened.

The SEBI order signed by Prashant Sharn, wholetime director, said, ''I hereby direct the entities mentioned in this order not to issue any offer document, advertisement, brochure soliciting money from investors or raise money from investors by way of new and / or additional subscription for any product (including Ulips) having an investment component in the nature of mutual funds, till they obtain the requisite certificate of registration from SEBI.''

With the order Aegon Religare, Aviva, Bajaj Allianz Life Insurance, Bharti AXA, Birla Sun Life, HDFC Standard Life, ICICI Prudential, ING Vyasa Life, Kotak Mahindra Old Mutual Life, Max New York Life, Metlife India, Reliance Life, SBI Life, TATA AIG Life stand barred from offering unit-linked insurance products without SEBI's approval.

A few months earlier, SEBI had questioned individual life insurance companies as to how they could sell investment products without its approval, to which companies had responded individually that insurance laws allowed them to offer an investment component within a life insurance policy.
 
In its latest order, SEBI said that it found that the entities by their own admission had stated that there were two components of Ulips- an insurance component where the risk on the life insurance portion vests with the insurer and the investment component where the risk lies with the investor.

''This establishes conclusively that Ulips are a combination product and the investment component need to be registered with and regulated by SEBI,'' it said.