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Monday, 21 June 2010 06:33 |
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End of row opens floodgates for new Ulips
By Dipak Mondal Jun 20 2010 , New Delhi
With the government settling the dispute over regulatory jurisdiction on Ulips in favour of the Insurance Regulatory Development Authority (Irda), the insurance industry is all set to roll out a slew of new unit-linked insurance products.
Rollout of new Ulips had been held back owing to the tussle between Irda and the Securities Exchange Board of India (Sebi). With the row now put to an end, the industry will begin fresh rollouts immediately, industry players said.
Immediately after the government announceme-nt, insurance players that Financial Chronicle spoke to said they will all be offering new Ulips shortly.
“The controversy is behind us now. Ulips are not pure investment products. And, the ordinance clearly supports the Irda stand on their regulation. With the confusion on regulatory jurisdiction removed, insurance companies will now launch new Ulips, which had been on hold due to the controversy,” IndiaFirst Life Insurance managing director and chief executive officer P Nandgopal said.
Anil Chopra, group CEO of financial products distributor Bajaj Capital, said “The government has played a pro-active role in resolving the issue and we welcome the move to clear the uncertainty on Ulips.” Chopra said Ulip sales had dropped 15 to 20 per cent due to the controversy.
Aviva Life Insurance CEO TR Ramachandran said it is good for the industry that the issue has been resolved. The controversy started after markets regulator Sebi barred 14 life insurance companies from selling Ulips. Sebi had termed them as investment products and asked the insurers to seek its approval before launching any new product.
But, Irda advised the insurance companies to ignore the Sebi order, kicking off a turf war. Subsequently, the finance minister intervened and asked the regulators to move an appropriate court to settle the issue.
The finance minister also approved an interim working arrangement that allowed Irda to regulate all existing Ulips, pending a settlement of the issue, but banned launch of any new Ulip till a decision on the issue is arrived at.
The government decision on Friday will make all public interest litigations on Ulips pending in different courts redundant. One PIL was filed in the Bombay high court by an investor seeking clarity on the jurisdiction of Ulips. Another such case was filed in Allahabad high court on misselling of Ulips.
On its part, Sebi had approached the Supreme Court seeking transfer of all the public interest litigations to one court for early redressal of the issue.
G V Nageswar Rao, MD and CEO of IDBI Fortis Life Insurance, said with the government putting an end to the dispute, the cases pending in different courts have now become redundant.
Sebi chairman CB Bhave did not answer calls, SMSes and mails sent by Financial Chronicle asking if the markets regulator will challenge the government decision. The full board of Sebi is likely to meet shortly and take stock of the developments. An official close to the development said Sebi has begun consultations with some constitutional and legal experts on the issue.
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