In a piquant situation, insurance regulator Irda on Saturday rejected the market regulator Sebi's ban on life insurance companies from raising funds through unit-linked insurance policies and asked them to do business as usual.
Taking Sebi head on in the turf war over who would administer Ulip (unit-linked insurance products) scheme, Irda, in a surprise order, told the 14 affected life insurance companies that it has set aside the Sebi ban. Sebi chairman CV Bhave nor its spokesperson could be contacted for comments.
The Irda order comes within 24 hours of Sebi banning 14 life insurers, including those belonging to the Tatas, Reliance Anil Ambani Group, SBI, ICICI Bank and HDFC among others from raising the funds through Ulips.
Earlier in the day, finance secretary Ashok Chawla told reporters that said it (the Sebi ban on Ulips) is an issue that needs to be settled by the two regulators.
"It's a matter between the regulators, so they have to decide," Chawla said. "Sebi has taken a legal process. So, let's see what happens," he added.
Irda in its order late Saturday said, "all the 14 insurance companies which are mentioned in the order of Sebi are directed to note that notwithstanding the said order of the Sebi, they shall continue to carry out insurance business as usual including offering, marketing and servicing Ulips in accordance with the Insurance Act."
Sebi in its order issued Friday evening asked as many as 14 life insurance companies not to raise money for Ulips without obtaining the certificate of registration from the market regulator.
Describing the Sebi action as "wholly misconceived and without jurisdiction," Irda said it would have brought the insurance industry to a "stand still" and seriously jeopardised the interests of the policyholders and the interests of insurers, the Irda order said.
It would have also resulted in "complete drying up of the revenue flows to insurance companies which could disrupt the payment of benefits on maturity, on death and on other admissible claims, putting the policyholder and the general public to irreparable financial loss, it said.
"The financial position of the insurers will be seriously jeopardised thus destabilising the market and upsetting financial stability", Irda added.
About 7.03 crore Ulip polices involving a total premium of Rs 90,645 crores were in force in 2008-09. As many as 16.7 lakh policies were sold with a premium of Rs 44,611 crores during April-February 2009-10. PTI
