Sebi bans ULIPs of 14 pvt life insurance cos
TIMES NEWS NETWORK Mumbai: In a significant order late on Friday,market regulator Securities and Exchange Board of India (Sebi) banned the 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. Interestingly, the Sebi order does not cover state-owned insurance major Life Insurance Corp of India (LIC). There is no immediate clarity on the fate of the 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 mutual funds 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 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 of 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. -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
