The rift between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development (IRDA) Authority over the regulation of the investment component of Unit Linked Insurance Plans (Ulips) has stopped new entrants on their tracks.
“No new player has entered the Indian Insurance Industry over the past two years because of the unstable environment over the regulation of some insurance products and also because of the wait for rise in FDI (foreign direct investment) limit in the sector to 49 per cent from the current 26 per cent,” said an industry source who asked not to be identified.
The source listed Japan’s Nippon and Tokio Marine and Korea’s Samsung group among the prospective entrants waiting for a stable policy regime. “Even domestic players like Indiabulls have plans to enter the sector but are waiting for some stability to come in,” said the source.
An insurance Bill that would enable 49 per cent in foreign direct investment has also been stalled for two years now.
The insurance industry offers commissions to distributing agents, unlike the mutual industry, which has now gone “no-load.” Buyers now pay a transparent fee.
The D. Swarup panel wants insurance to go to a no-load regime by 2011 and Finance Minister Pranab Mukherjee has backed the plan. In April, SEBI restrained life insurers from launching new Ulips.