The mutual fund industry has reacted with concern to insurance firms’ unilateral decision to prevent asset management companies from bundling insurance products with their own fund offers.
The Life Insurance Council, the apex body of the insurance industry, fired a fresh salvo on Thursday after its members decided not to offer any of its products to be bundled with mutual fund products from October 1.
Mutual fund houses said the move provided an unfair advantage to insurance firms.
“This move is anti-investor and is a move that creates monopoly of the insurance players to offer insurance,” said the head of a fund house on condition of anonymity.
Companies such as Reliance Capital AMC and Birla Sunlife AMC have been bundling insurance cover with their equity schemes. Such schemes worked on the same principles on which an organisation buys a term plan for its employees.
The latest salvo by the insurance companies, mutual fund houses said, will deprive the investors to get a term plan on their mutual fund scheme.
“A level field for mutual funds would mean that the mutual fund industry should be allowed to offer insurance as a bundled product with their equity products,” said the head of another mutual fund house on conditions of anonymity.
Fund houses, who also have group companies offering insurance products, would be constrained the most by the latest move, industry sources said.
Chairman of Association of Mutual Fund Industry (Amfi) A.P Kurien declined to comment on the new development.
“I will discuss the issue with the Life Insurance Council before I react to it,” he said.
AMFI had earlier made a proposal with the Sebi that mutual funds should be allowed to offer insurance cover to the
investors along with their mutual fund schemes.
Industry sources, however, said that till the time mutual funds receive a formal communication, they could continue to offer the term insurance product along with their saving and investment schemes.
A top executive of a leading asset management company said the industry would take up the matter with the relevant authority.
Mutual funds and insurance companies are already locked in a battle over unit linked insurance plans (ULIPs) with the former arguing that it faced unfair regulatory controls despite offering the similar products.
Market regulator Securities Exchange Board of India (SEBI) had circulated a paper asking for a level playing field for mutual funds.
Last month, a high-level coordination committee, attended by the top regulatory and government officials, had asked Sebi and the Insurance Regulatory Development Authority (Irda) to discuss the nature and characteristic of ULIPs.