A day after asking 14 insurance companies to ignore the Securities and Exchange Board of India (Sebi) order banning sale and renewal of unit-linked insurance policies or Ulips, Insurance Regulatory and Development Authority (Irda) Chairman J Hari Narayan says he wants to resolve the issue at the earliest. At the same time, he has ruled out dual regulation of Ulips — which essentially offer investment options (equity and debt) along with insurance cover, he tells Shilpy Sinha in an interview. Excerpts:
Why did you ask companies to ignore the Sebi order? Had we not issued this circular, the Sebi order would have led to a standstill and many policies would have been surrendered. The amount of money that would have gone out of the system is huge, and subsequently many policies would have lapsed. This (the Sebi move) would have resulted in a drying up of revenue for companies, which is not good for the economy and its growth. This (Irda order) is in favour of policyholders and insurance companies.
Do you think there is a case of dual regulation of Ulips? That is one solution that is being talked about. Certainly not. In the order they have mentioned that insurance is not to be regulated by Sebi. It is important to have clarity. There is confusion between the roles of the two regulators. In the Indian system, each regulator has a definite role. There are many financial products that may overlap.
Now, either a court of law or the government will clarify who has the jurisdiction to regulate Ulips.
From what we have gathered, discussions with Sebi were going on smoothly but suddenly this order was issued. Given this background, are you now open to discuss the issue with Sebi? We are open to talks with Sebi. But as of now, we will wait for them to respond before we take any step. The ball is now in Sebi’s court.
What will be your next course of action? We will wait and see. Irda is concerned about policyholders. Since stopping insurance companies from collecting money would have disrupted policyholders’ benefits, it (the Irda order) was only in the best interest of policyholders and insurance companies. Since we have been set up to regulate and see that the interests of the policyholders are protected, we asked companies to continue to collect renewal as well as new premium. The next course of action will be decided after Sebi’s response.
What will be the impact of the entire episode on the business of the life insurance companies? Despite our assurances that policyholders’ money are safe and secure, business may still drop. But our steps are in the best interests of the policyholders. Protection is of utmost concern for us. By when do you think this matter would resolve? I wish it was resolved yesterday. Resolution is not in my hands so it is hard to put a time frame to it. We will see how the matter pans out. We will definitely like to close the matter fast.