Life insurance companies can do business in equity and bond-linked products, such as unit-linked insurance policies (ULIPs), as per rules laid out by the insurance regulator IRDA, government clarified in Parliament on Tuesday.
In a written reply to Rajya Sabha, minister of state for finance, Namo Narain Meena said, "The Insurance Regulatory and Development Authority has reported that every life insurance company registered under the IRDA Regulations, 2000, can transact life insurance business, which includes unit-linked business."
The statement will put the controversy between Sebi and IRDA on the issue of which agency would regulate the unit-linked products of insurance companies, at rest. Recently, Sebi in a statement said that insurance companies can not launch a ULIP without its approval.
The controversy had started when Sebi had issued an order, which prohibited insurance companies from raising funds through ULIPs, without registering themselves with the market regulator. Sebi argued that ULIP is based on equity of companies, and therefore it should come under its jurisdiction. Responding to Sebi's order, IRDA asked the insurance companies to ignore it and continue with their business as usual. This created an unique situation and the finance ministry intervened to resolve the matter between the two regulators.
After intervention of FM Pranab Mukherjee, both the regulators decided to approach a high court to resolve the issue and till them status quo would be maintained. That means, Sebi's order was put on hold. However, Sebi again passed an order that no new ULIP could be launched by insurance companies without Sebi's approval. This created confusion among the insurance companies.
[Source: The Times of India]