By IANS,
New Delhi: Finance Minister Pranab Mukherjee Monday said status quo ante would be maintained on the sale of unit-linked insurance plans until an appropriate court decides on which regulator has jurisdiction over such instruments, popularly called ULIP.
“Regulators have agreed to jointly seek a binding legal mandate from an appropriate court. But meanwhile, status quo ante is being maintained,” Mukherjee told reporters here on the sidelines of an event to mark the foundation day of the markets regulator.
Accordingly, the ban on sale of such instruments was lifted Monday, till such time an appropriate high court gives its directions.
The finance minister’s remarks came against the backdrop of the government seeking to bring about a truce between two financial markets regulators who had issued contradictory orders on sale of equity-linked plans by insurance companies, even as existing investments were termed safe.
Finance Secretary Ashok Chawla also met with the top brass of the Insurance Regulatory and Development Authority (IRDA) and the Securities and Exchange Board of India (SEBI) to resolve matters.
“The chairman of SEBI and the chairman of IRDA held discussions on unit-linked insurance plans to resolve any ambiguity and ensure smooth functioning in the market,” the finance minister said.
The government’s intervention came after the markets watchdog barred 14 insurers from selling these plans without its prior approval beginning Saturday, after which the insurance regulator a day later asked these entities to ignore the order.
But both the regulators and the government also sought to assure investors that their investments were safe in these unit-linked insurance plans, one of the most popular investments in the country.
“I think we will have greater clarity on the respective jurisdictions. Investments are safe,” IRDA chairman J. Hari Narayan said, as the three sides prepared to meet on the contentious issue at North Block, the headquarters of the finance ministry.
“I don’t think I have come here for a decision. I’m here to give a perspective on the issue — SEBI does not have jurisdiction on ULIP products. SEBI believes otherwise,” Narayan said.
“The case will now be taken up at a high court,” SEBI chairman C.B. Bhave said.
The insurance regulator feels the markets watchdog’s move may force premature surrender of insurance policies, causing substantial loss to the policyholder and to the insurers, destabilising the markets and upsetting the financial stability.
But SEBI feels since these products have a major equities component they certainly came under its jurisdiction and it was only fair to regulate their business so as to prevent any move that may go against the interests of investors.
The affected insurers are Aegon Religare, Aviva, Bajaj Allianz, Bharti AXA, Birla Sun, HDFC Standard, ICICI Prudential, ING Vyasa, Kotak Mahindra, Max New York, Metlife India, Reliance Life, SBI Life Insurance and TATA AIG.
During the first 11 months of the previous fiscal, a total of 1.67 million policies were sold with a total premium of Rs.44,611 crore ($9.9 billion). The total premium involved in these products amounted to Rs.90.645 crore (a little over $20 billion).