Life insurance firms can't float investment scheme, claims PIL

Gujarat High Court today issued notices to the Government of India, Finance Secretary, Insurance Regulatory and Development Authority and 19 major insurance companies, including LIC, over a public interest litigation alleging 'corrupt practices'.
A division bench of Chief Justice Bhaskar Bhattacharya and Justice J B Pardiwala posted the hearing to July 3, directing all the 22 respondents to file their replies.
The petitioner, a city-based chartered accountant Kailash Maheswari, had objected to insurance plans such as Pure Endowment, Endowment, Unit linked Plans and Term plan with Return of Premium.
"As per law, life insurance business is only meant to be a business to compensate the beneficiaries in case of death of the policyholder," the petition said, adding "payment on survival" is outside its purview, therefore all the savings as well as investment plans of insurance companies are illegal.

These companies do not have a licence to do the business of collecting saving deposits or the investments, it said.
The petitioner wanted action against insurance companies under provisions of Prize Chits and Money Circulation Scheme (Banning) Act.