In a major setback to the Securities and Exchange Board of India (Sebi), the Centre has issued an ordinance upholding the jurisdiction of the Insurance Regulatory Development Authority (IRDA) on unit-linked insurance policies (Ulips).
“Life insurance business shall include any Ulip or any such instruments. This would set at rest all the issues regarding Ulips between the two financial regulators,” the government said in a press statement after promulgating an ordinance to this effect. There was a tussle between the two regulators, Sebi and IRDA, on who had the jurisdiction to regulate Ulips.
In April, Sebi had barred some 14 insurance firms, including HDFC, SBI, Birla SunLife, Tata AIG and Reliance, from selling new Ulips.
A Ulip, a financial product sold by life insurance companies, is a very popular product as it serves the dual need of insurance and investment. Sebi believed that since Ulips have an investment component, these are like mutual fund investments and need to be regulated and registered by it. On the other hand, IRDA argued that Sebi had no right to interfere in the Ulip business as they were insurance products.
Now, with this ordinance, new Ulips will no longer be required to get Sebi approval. Ulips account for more than 50 per cent of the life insurance business.
The two regulators had also approached the courts to decide who would regulate Ulips. According to sources, a decision to bring the ordinance was taken in the Cabinet meeting chaired by Prime Minister Manmohan Singh on Thursday.