Regulators' tussle leaves life insurers worried – Yahoo! India News
Chennai, April 11 (IANS) The turf war between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) over regulating unit linked insurance policies (ULIPs) seems to have put life insurers between the proverbial devil and the deep sea.
While SEBI Friday night banned 14 life insurers from selling ULIPs without registering with it like mutual funds, the IRDA Saturday issued an order asking the life insurers to defy the former and continue selling ULIPs.
'Life insurers are the punching bag in the shadow boxing between SEBI and IRDA,' an industry official told IANS on the condition of anonymity.
The 14 life insurers banned by SEBI Friday from selling ULIPs plan to seek legal remedy on the issue Monday.
Industry officials not wanting to go on record also questioned the 10-year delay on the part of SEBI in coming out with its reservations about ULIPs.
According to industry officials the remaining nine life insurers, including Life Insurance Corporation of India, selling ULIPs will also be issued show cause notices by the SEBI.
Life insurers also pointed out that the SEBI ban does not give them any grace time to phase out ULIPs or take corrective actions.
They seem to have little clarity on what registration with SEBI would mean. Will it mean getting a certificate of registration or being subject to SEBI regulations pertaining to mutual funds?
It is the latter that the life insurers are fearing as it would affect their income stream in the form of various charges which are far higher than that of mutual funds.
'If registration involves being subjected to other regulations like mutual funds then would SEBI allow parity with the mutual funds when it comes to capital adequacy norms,' S.B. Mathur, secretary general, Life Insurance Council of India (LICI) told IANS Sunday.
With a meagre capital of around Rs.3,000 crore, the mutual fund industry manages a whopping fund having a size of Rs.700,000 crore, he said.
The IRDA in its Saturday order allowing the 14 banned life insurers to continue selling ULIPs has said the companies have an equity base of Rs.16,281 crore as on March 31, 2009.
The insurance regulator said that the SEBI order would cause the stoppage of all renewals of insurance policies already invested in by the public.
It may result in the forced premature surrender of insurance policies, causing substantial loss to the policy holder and to the insurers, destabilising the market and upsetting financial stability, the IRDA added.
The IRDA observed that in the year 2008-09, 7.03 crore ULIP polices involving a total premium of Rs.90,645 crore were in force.
Between April 1, 2009 and Feb 28, 2010, 16.7 lakh policies have been sold with a premium of Rs.44,611 crore.
'Life insurers have to invest their corpus as per the investment regulations of IRDA whereas there are no such strict norms for mutual funds. Further, mutual funds are not subject to any rural sales targets whereas life insurers have to sell a sizeable percentage of their total products in rural areas,' argues Mathur.
On the charges of absence of transparency in life insurance sector, Mathur said: 'Nobody knows who owns a mutual fund company whereas everything is open in the case of life insurers.'
Life insurers have to bare their annual reports to public like the banks.
Asked about the complaint on high commissions paid to life insurance agents which affects the policy holders, he said: 'Insurance needs to be sold. The retail base of mutual funds is very low. The new pension scheme (NPS) without any charges has got only 4,000 subscribers.'
However, one industry expert told IANS on the condition of anonymity that the insurance regulator does not have the expertise to oversee the capital market operations of life insurers and as such the field is best allowed to SEBI.
Venkatachari Jagannathan
Affordable Life Insurance
In a nutshell, the most affordable life insurance is the stand-alone type. This means that you are not purchasing the insurance as part of any home insurance plan or medical insurance plan and that you are not purchasing it from one of the big insurance providers. You are simply buying what you need and nothing else and that is what makes it affordable life insurance.
Even though buying life insurance just on its own is cheap it is probably worth your while to purchase it with medical health insurance. This is because if you buy both in a package deal you get both at a cheaper price then you would if you bought them each as stand alone insurance packages. Bundling up wherever you can is always a good idea if what you are ultimately after is affordable life insurance.
Before approaching an insurance company, try to look at its ratings online to see if it is cheap compared to what the competition is offering. There are actually prices that will tell you what the yardstick is for affordable life insurance.
There are several companies online that rate affordable life insurance. An example is Best’s Rating Service. Some of them are rated out of ten but often these companies grade the insurance company in terms of its affordability. The grades are like the ones you got for writing essays in school with A plus being the highest kudos that you can get.
You can also use brokers or insurance agents to try and get you the most affordable life insurance quotes. Some of these brokers are independents and can give you quotes from various companies and others work for only one company such as State Farm or Allstate. Be sure to go for several quotes and compare the cost against what you get. Make sure that you demand proof of coverage when you get life insurance through a broker.
Sometimes these affordable life insurance brokering outfits are corrupt and delay sending in your policy. Sometimes this can also lead you to believe that you are covered when you aren’t. It is a terrible shock to a family that has lost someone to also lose their life insurance because they thought they were covered and they were not.
When shopping around for landlord insurance you should also consider the deductibles carefully. May companies offer reduced premiums in exchange for higher deductibles. Try to go for the high deductible so you ca
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n save money in the long run. This approach will also usually get you a better insurer and a better policy. The most affordable one that you can manage is highly recommended as usually this means that there is less chance of things screwing up.
Some financial experts would say that the most affordable insurance is the plan that is not going to break your personal life. Think about what it is that you have to do to prove your family from having to borrow money at a high interest rate in order to pay for a funeral before you purchase the insurance.
By: Sarah Martin
Article Directory: http://www.articledashboard.com
Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in business, finance, and life insurance. For affordable life insurance plans, please visit www.equote.com/.
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