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War on Ulips: Is SEBI right?
Mon, 12 Apr Pre-Open

The war of words just got louder. We are talking about the fighting going on between the stock market regulator SEBI, and insurance regulator IRDA. The bone of contention is the regulation of 'Ulips' or unit linked insurance plans.

Ulips are possibly the single-biggest innovation in the field of life insurance in the past several decades. These are also one of the most mis-sold products in the insurance business. Considering that returns from ULIPs are determined by the stock markets, SEBI had been at loggerheads with IRDA as to who is responsible for regulating the product.

Last weekend, SEBI had banned 14 life insurance companies from selling Ulips without its approval. The IRDA retaliated. It later asked these companies to ignore the ban imposed by SEBI. It also asked them to continue their business as usual.

The big fight between these two regulators started when SEBI last month sent a show-cause notice to all life insurance companies asking them to explain why they hadn't taken its prior approval before launching Ulips. IRDA, for its part, considers Ulips under its purview. Further, it is in no mood to give in to SEBI's intervention in the matter. We believe that since Ulips have a big component that goes towards investments in various securities, it is not surprising that SEBI sees itself as a governing body for the same.

In fact, SEBI's intention is to get the insurance companies selling Ulips to register with it and sell their products after they receive the market regulator's prior approval. As Mint reports, "It (SEBI) does not intend to kill Ulips. So, invoking compliance rather than unsettling insurance companies was called for."

With the kind of sharpness SEBI has shown in recent issues concerning the stock market, we feel that any regulation from it in this matter would be a welcome move.

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