From crisis to crisis

Greece is out of the way. Will Portugal come knocking now?

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    FM restores status quo on ULIPs

    Finance minister Pranab Mukherjee has said that SEBI and IRDA have agreed to “jointly seek a binding legal mandate from an appropriate court” on the ULIPs issue

    Finance minister Pranab Mukherjee has finally stepped in to provide some clarity on the ongoing feud between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA). He has said that both the regulators have agreed to maintain the status quo that existed before SEBI’s ban on 14 life insurers from raising funds for unit-linked schemes.

    Although the arrangement is temporary, Mr Mukherjee has provided some relief to life insurance companies.

    “Policyholders of unit-linked insurance plans (ULIPs) offered by different insurance companies are assured that these policies are safe and secure and the matters arising out of the recent orders of SEBI will be addressed expeditiously in the appropriate forum in accordance with law,” IRDA has said on its website.
    Before Mr Mukherjee’s decision, Moneylife had spoken to various independent financial advisors (IFAs) and received a mixed bag of reviews from both policy-holders and the distribution community.

    “Investors have panicked. We have asked our clients to hold on and explained the position. Clients initially came to us with the intention of closing funds,” said Ramesh Bhatt, a Chennai-based IFA and chief executive of Aniram, a financial services firm.

    “Currently, we are not going ahead with our existing prospects. We are waiting for the dust to settle down. We had clearly positioned our products. It has created unnecessary disruption in the market,” said Thiru Murugan, a financial consultant with Wealth Creation & Management Services.

    Another certified financial planner, Vivek Rege of VR Wealth Advisors, said that investors will not be impacted.

    Many analysts believe that a ban on sale and renewal of ULIPs sold by all insurance companies will lead to Rs75,000 crore being drained from the stock market.

    But many insurance companies disregarded SEBI’s order and went along with their usual business. 

    Call centres manned by insurance companies were receiving numerous calls today due to SEBI’s decision. An official from Aegon Religare confirmed that even though it was business as usual, many ULIP investors called to ask about their investments.

    While some distributors were advising their clients not to panic, a few others were saying that ULIPs were largely mis-sold by distributors, agents, insurance firms and IRDA. “It is a highly mis-sold product in the country. There is no regulation. The regulator, the insurance companies and the distributor, all are responsible. They are all giving projections on returns based on past performance, which is not correct. It is not an appropriate product for the investor,” said Harish Mohan, managing director, Time Financials.

    Many players could not figure out why the Life Insurance Corporation of India (LIC), which dominates more than 50% of the life insurance market, was spared the ban. “It is a right decision by SEBI. LIC’s ULIP products should also be banned. The seven-year highest NAV (net asset value) product launched by LIC is neither profitable for investors nor does it provide long-term insurance cover as it is restricted to ten years. Charging investors by cancellation of units is an injustice to investors,” a reader named Sadanand Thakur had commented on the Moneylife website, on one of our earlier stories related to ULIPs.

    As of now, the status quo continues. But if there is a long-drawn battle in the courts over ULIPs, the regulatory war may have investors caught in the crossfire.

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    Harbinder Mehra

    1 decade ago

    SEBI has done what it should have done long time back. IRDA is run like an association for the profit mongers insurance companies in India.The way ULIP are positioned and sold in India can be considered height of miss selling.ULIP are sold in villages of India as FD products by Insurance companies by having tie up with Nationalized banks.

    SEBI has taken a long term view for the overall stability of market whereas IRDA move smacks of short term motives to protect insurance companies.

    I think that for overall benefit SEBI's effort should be lauded and supported in every forum.

    Insurance houses present a united front; defy SEBI ban on ULIPs

    All the major life insurance companies have turned a blind eye to the capital market watchdog’s diktat barring them from selling ULIPs; business continues as usual

    For life insurance companies, business continues as usual despite a blanket ban imposed by the Securities and Exchange Board of India (SEBI) barring them from selling unit-linked insurance policies (ULIPs). All 14 insurance houses barred by SEBI have chosen to defy the order and are continuing to offer ULIP products to customers, while collecting premiums from existing ones also.

    Several of these companies have been flooded by customer enquiries, with anxious policy holders desperate to know whether their policies are safe and operational. Even those that have not been named among the 14 companies are getting regular calls from nervy customers.

    Following the insurance sector regulator Insurance Regulatory and Development Authority’s (IRDA) go-ahead to continue selling ULIPs, insurance companies have presented a united front in openly ignoring the SEBI diktat. When Moneylife contacted several companies under the pretext of customer enquiries, we were told that ULIP products would continue to be offered until further communication to the contrary is received from the company management. We were also informed that existing holders of ULIPs would face no difficulties and that they would continue collecting premiums as usual.

    These companies include AEGON Religare, Aviva Life, Bajaj Allianz, Bharti AXA Life, Birla Sun Life, HDFC Standard Life, ICICI Prudential, Kotak Mahindra, Reliance Life, SBI Life, Tata AIG Life, Max New York Life. Officials from Metlife India and ING Vysya Life could not be reached.

    An official from Bajaj Allianz said, “This ban will not affect our customers—existing or new. You can buy new plans or continue paying premiums on existing policies.”

    Another official from Bharti AXA Life said, “We will continue to issue new ULIP policies till the time we get a directive to the contrary from our management. Existing policy holders need not be concerned about their policies.”

    A representative from Reliance Life reiterated, “Our customers need not worry. ULIPs are regulated by IRDA and not SEBI. As such, we will continue to offer ULIPs to new customers.”

    With IRDA firmly standing by insurance companies, the battle between the two financial regulators has taken an ugly turn. SEBI had on Saturday issued a startling order barring 14 insurers from selling ULIPs without its approval. The very next day, IRDA took the market watchdog head-on by challenging SEBI’s ban and stating in its directive, "Notwithstanding the SEBI order, these insurance companies can continue to do business as usual, including offering, marketing and servicing ULIPS."

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    dillip swain

    1 decade ago


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