Life insurers relieved after truce between Irda, Sebi

Life insurance companies today heaved a sigh of relief following a truce effected by the Union finance ministry between the two regulators, Sebi and Irda, on the Ulips issue.

Both capital market regulator Sebi (Securities and Exchange Board of India) and insurance sector regulator Irda (Insurance Regulatory Development Authority will now jointly seek a binding legal mandate from an appropriate court, according to an announcement made by finance minister Pranab Mukherjee.

Welcoming the development, Life Insurance Council secretary-general SB Mathur said, "It is a transparent method of resolving the imbroglio and removing the ambiguities that have arisen. It will also create a road-map to resolve issues involving multiple regulators in the future as well."

Several life insurers also welcomed the move.

"We welcome this step as it will create confidence among the consumers," a Max New York Life spokesperson said.

Bajaj Allianz Life's chief operating officer V Philip said, "We welcome the initiative as it clarifies the concerns of our customers. Anxiety on the part of our customers could have caused delay in payment of renewal premiums."

According to a law firm official, Sebi will now have to come out with a fresh order suspending the ban which was imposed on 14 life insurance companies.

"The Sebi order [of April 9] will now have to be withdrawn and it will have to issue a fresh one suspending the earlier order. It is an immediate relief to life insurance companies," Nishith Desai's principal, Siddharth Shah, said.

Sebi and Irda can now approach either the Delhi, Bombay, or Andhra Pradesh high court in the matter, he said.

The tussle between the regulators has been going on for a few months now with Sebi contending that Ulips (unit-linked insurance plans) fall in its jurisdiction since a part of the premiums is invested in equities and debt.

It, therefore, wanted life insurers dealing in Ulips to obtain its approval before launching these products.

Since none of these companies had done so, Sebi banned 14 life
insurers from selling Ulips on April 9.

Irda, on the other hand, argued that since it is the insurance-sector regulator, insurance companies fall only under its purview.