IRDA VS SEBI

8/8/2019 IRDA VS SEBI

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PRESENTED BY

GAVISH KUMAR B JAIN


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ULIP is an abbreviation for Unit Linked Insurance Policy.

A ULIP is a life insurance policy which provides a combination ofrisk cover and investment.

The dynamics of the capital market have a direct bearing on theperformance of the ULIPs.

REMEMBERTHAT IN A UNIT LINKED POLICY, THEINVESTMENTRISK IS GENERALLY BORNEBY THEINVESTOR.


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General Description Nature of Investments Risk Category

Equity Funds Primarily invested in company

stocks with the general aim of

capital appreciation

Medium to High

Income, Fixed Interest and Bond

Funds

Invested in corporate bonds,

government securities and other

fixed income instruments

Medium

Cash Funds Sometimes known as Money

Market Funds invested in cash,bank deposits and money market

instruments

Low

Balanced Funds Combining equity investment with

fixed interest instruments

Medium


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SEBI ON ULIPs IRDA ON ULIPs

The SEBI passed a stunning order of

banning 14 life insurance companies

involved in serving ULIP products, on the

ground that they were akin to mutual

funds and may need to obtain

registration from SEBI to proceed

further with it.

In a reaction to the SEBI order, IRDA

retaliated on Saturday by invoking its

power under section 34(1) of the

Insurance Act, directing insurance

companies to disregard the order from

SEBI and proceed further with their

business as usual.


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APRIL 9: Stock market regulator SEBI bans 14 lifeinsurance companies from selling ULIPs withimmediate effect

APRIL 10: Insurance regulator IRDA asks insurancecompanies to ignore SEBI order and carry on businessas usual

APRIL 12: Government brokers peace between SEBIand IRDA. Ban on sales and renewal of Ulips lifted

At, present the case is in Supreme Court, India andthe final decision on ULIPs will be taken by theSupreme Court.


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A. Aegon Religare Life Insurance Company Limited

B. Aviva Life Insurance Company INDIA Limited

C. Bajaj Allianz Life Insurance Company Limited

D. Bharti Axa Life Insurance Company Limited

E. Birla Sun Life Insurance Company Limited

F. Hdfc Standard Life Insurance Company Limited

G. Icici Prudential Life Insurance Company Limited

H. Ing Vyasa Life Insurance Company Limited

I. Kotak Mahindra Old Mutual Life Insurance Limited

J. Max New York Life Insurance Co. Limited

K. Metlife INDIA Insurance Company Limited

L. Reliance Life Insurance Company Limited

M. Sbi Life Insurance Company Limited

N. Tata Aig Life Insurance Company Limited


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A. The product is unit linked and money is raised from public through sale ofunits to them.

B.The investment risk in chosen investment portfolio is borne by investors.

C. Upon untimely death before the expiration date of the policy the policy holder

will be paid either the NAV (Unitized Fund Value) or the sum assuredwhichever is higher.

D. Upon survival at the maturity of the policy, the policy holder will be paid theNAV (Unitized Fund value) of the investments.

E. Premium will be used to allocate units in the fund chosen by the investor.

F.The product has characteristics such as fund management, fund managementcharges, switch and partial withdrawal options.


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G. unit linked life insurance products are different from traditionalinsurance products and are subject to risk factors.

H. the premium paid in unit linked life insurance policies are subject toinvestment risks associated with capital markets and the unit price ofthe units may go up or down based on the performance of the fundand factors influencing the capital market and theinsured/policyholder is responsible for his/her decisions.

The Above Mentioned Points Clearly Says ThatULIPs Is A Combination Of Insurance AndInvestment.


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ARGUMENT 1:

Some of the entities have pleaded that theregulations issued by IRDA are special laws for

ULIPs and SEBI cannot apply the general lawsapplicable to tradable securities such ascollective investment schemes or mutual fundsto ULIPs.


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ARGUMENT 2:

It is also contended that a mutual fund is afund established in the form of a trust forraising money through the sale of units

through the public and established under oneor more schemes for investing in securities.


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ARGUMENT 3:

It is also contended by the said entities thatULIPs are predominantly life insuranceproducts having an investment component.


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ARGUMENT 4:

The entities have contended that thepredominant feature of a ULIP is insurancecover which is dependent on human life andthe mere existence of an additional investmentfeature cannot convert a ULIP into a mutualfund. Further, it has been said that ULIPs havea mandatory insurance cover which forms avital and inseparable part of every ULIP.


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In view of the above, I conclude that ULIPsoffered by the said entities are a combinationof investment and insurance and, therefore,the investment components are in the natureof mutual funds which can only beoffered/launched after obtaining registrationfrom SEBI under section 12(1B) of the SEBIAct.


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IRDA VS SEBI

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