In a significant order late on Friday, market regulator Sebi banned issuance of Unit-Linked Insurance Plans, popularly known as ULIPs, by life insurance companies.  Sebi has asked 14 private insurance companies, including market leaders like SBI Life, ICICI Prudential Life and Reliance Life Insurance, not to issue any more ULIP products. The Sebi order does not cover state-owned insurance major LIC. There is no immediate clarity on the fate of existing products.
At present, over 70% of the new business premium for most insurance companies come from ULIPs, running into thousands, if not lakhs of customers. The genesis of the Sebi order goes back to the feud between MFs and insurance companies.

when the latter started issuing ULIPs about 5-6 years ago, offered huge commissions to insurance agents and flooded the market with these products which nearly mirrored mutual fund (MF) products. ULIPs are products that combine insurance and investment for the insured and are mostly market-linked.

Between 2005 and 2008, when the stock market was on a bull run, MFs lost business but insurance companies mopped up large sums of money through ULIPs.

In December 2009 and January 2010, Sebi had issued show cause notices to 14 insurance companies asking them why action should not be initiated against them for issuing investment products without Sebi’s permission. On Friday, Sebi wholetime member Prashant Saran passed the order putting a ban on ULIP products by these 14 insurers.

One of the main contentions for Sebi was that although a ULIP is an insurance product which comes under IRDA, part of it is also an investment product which should ideally be regulated by Sebi.

14 Insurance Companies are as follows:-

a. Aegon Religare Life Insurance Company Limited
b. Aviva Life Insurance Company India Limited
c. Bajaj Allianz Life Insurance Company Limited
d. Bharti AXA Life Insurance Company Limited
e. Birla Sun Life Insurance Company Limited
f. HDFC Standard Life Insurance Company Limited
g. ICICI Prudential Life Insurance Company Limited
h. ING Vyasa Life Insurance Company Limited
i. Kotak Mahindra Old Mutual Life Insurance Limited
j. Max New York Life Insurance Co. Limited
k. Metlife India Insurance Company Limited
l. Reliance Life Insurance Company Limited
m. SBI Life Insurance Company Limited
n. TATA AIG Life Insurance Company Limited

Tags: ,

More Under SEBI

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

September 2021
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
27282930