In a bid resolve the Unit Linked Insurance policy (Ulip) row between Insurance Regulatory and Development Authority (IRDA) and the Security and Exchange Board of India (SEBI) over jurisdictional issues, the government is set to bring an ordinance and constitute a permanent joint mechanism to be headed by finance minister to look into the matter.
Confirming this, sources in the government said, a draft note with respect to “the ordinance and the joint mechanism” was placed before the Cabinet at its meeting here on Thursday. Prime Minister Manmohan Singh chaired the meeting.
“The Union Cabinet on Thursday took up promulgation of the Securities and Insurance Laws (Amendment and validation) Ordinance, 2010 for discussion. However, a formal announcement of the decision on the subject would be made at a later date. The ordinance is aimed at bringing amendments to the Insurance Act, 1938, the IRDA Act, 1999 and the Sebi Act, 1992,” the sources, while quoting the draft note, said.
According to draft note, the sources said, the move is aimed at clearing doubts in the minds of investors about Ulips “consequent to the jurisdictional dispute between Sebi and IRDA” over the investment tool.
The draft note, the sources confirmed, also proposes setting up of a “joint committee of the two regulators under the chairmanship of finance minister” which will address the “jurisdictional issues” between them so as to insure the “smooth functioning of the financial sector with respect to Ulips”. The government, however, in its note, made it clear that the life insurance business also includes any unit-linked insurance business, the sources added.
Recently, the Sebi and the IRDA were at loggerheads to claim that Ulips come under their respective jurisdictions. Both the regulators issued orders in this regard, which left financial institutions a confused lot and thereby generating a lot of concerns among investors. Consequently, the insurance companies were forced not to issue new Ulips. Sensing the gravity of the situation, finance minister Pranab Mukherjee had then promised that the government would soon resolve the issue.