Government ends India’s war of the ULIPs

A two-month battle for regulatory
control over unit-linked insurance products (ULIP) between
insurance regulator the Insurance Development and Regulatory
Authority (IRDA) and capital markets regulator the Securities and
Exchange Board of India (SEBI) has ended in victory for the
IRDA.

Bringing the dispute to an end in June was an
ordinance from the government which made the required changes in
the legal status of ULIPs.

In a statement, the Indian government noted:
“Life insurance business shall include any ULIP or any such
instruments. This will set at rest all the issues regarding ULIPs
between two financial regulators.”

The conflict between the two regulators began
in April when the SEBI issued an order restraining 14 of India’s 22
private life insurers from launching any new ULIPs or accepting
premiums for existing ULIPs until it had issued them a certificate
of registration. The IRDA responded by calling on insurers to
ignore the SEBI’s instruction.

Introduced in 2001, ULIPs are a major portion
of Indian private insurers’ new business. The IRDA reported that in
the financial year to March 2008 ULIPs accounted for 88% of total
private insurers’ premium income, a level which fell slightly to
86.8% in 2008-09.

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