Life insurance companies are planning to challenge the capital market regulator’s attempt to regulate Unit Linked Insurance Plans (Ulips) by citing a technical provision in the Securities and Exchange Board of India (Act) that says insurance plans do not come under collective investment schemes.
The controversy rages as ULIPs behave like mutual funds, attracting the SEBI’s watchdog eyes. The insurance regulator on Monday stuck to his guns, saying SEBI had no jurisdiction over insurance products.
Last week, SEBI issued show cause notices to several life insurance companies citing Section 12 (1B) of the SEBI Act that says ULIPs fall under the ‘collective investment scheme’ category and hence investment products.
Insurers say the applicable section should be Section 11AA that talks of insurance plans.
A top private insurance executive told HT, “We will be writing to SEBI and will cite Section 11 AA 3 (iii) that excludes insurance companies from seeking SEBI’s approval for launching a collective scheme.”
J Hari Narayan, chairman, Insurance Regulatory & Development Authority (IRDA) said, “We certainly have no plans to write to the government. We are examining the show cause notices and will firm our legal position in some time. However, SEBI has no jurisdiction on insurance.”