Life insurance cos respond to SEBI's ULIP notice

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Life Insurance companies have begun responding to the Securities and Exchange Board of India's showcause notice. While Max New York Life and Bharti AXA Life have responded to the notice, Kotak Life, Rel Life, and Aviva Life are yet to respond to the same.

On January 22, the market regulator had issued showcause notices to a number of insurance companies over their unit linked insurance plans (ULIPs). These include Bharti AXA Life, Bajaj Allianz, Max New York Life and Aviva Life. The showcause notice says that ULIPs fall under the "collective investment scheme" category which is largely investment accumulation products. As per Section 12 1(b) of the SEBI Act, these products require SEBI's approval.

Bharti Axa Life says ULIPs fall under the Insurance Act and are approved by the regulator. "The SEBI Act excludes insurance contracts."

The insurance regulator, IRDA, too says that no company is in violation of any regulatory requirements. It does not agree with the SEBI view that ULIPs require multiple regulatory approvals. All the insurance products that have been approved by the IRDA fall well within the purview of Section 2 (11) of the Insurance Act, IRDA has said, adding that the issue may require intervention from the Finance Ministry.

In its response to the SEBI show cause notice, MetLife says ULIPs are not akin to mutual funds. "There are several differences between ULIPs and mutual funds. ULIPs have a mortality aspect, life cover unlike MFs. Also, insurance is a subject matter of solicitation."