Chennai, Apr 11 (IANS): The Insurance Regulatory and Development Authority (IRDA) has asked 14 life insurers to defy the ban imposed by the Securities and Exchange Board of India (SEBI) on selling unit linked insurance policies (ULIP).
The IRDA, contending that the ban would bring the life insurance sector to a standstill, Saturday night directed the 14 insurance companies mentioned in Friday's SEBI order to "continue to carry out insurance business as usual, including offering, marketing and servicing ULIPs in accordance with the Insurance Act, 1938, Rules, Regulations and Guidelines issued by it."
Meanwhile, the life insurers -- Aegon Religare, Aviva, Bajaj Allianz, Bharti AXA, Birla Sun, HDFC Standard, ICICI Prudential, ING Vyasa, Kotak Mahindra, Max New York, Metlife India, Reliance Life Insurance, SBI Life Insurance and TATA AIG -- are expected to approach the court Monday to get a stay on the operation of SEBI's ban order.
According to IRDA, 7.03 crore ULIPs involving a total premium of Rs.90,645 crore were in force in 2008-09.
A total of 16.7 lakh policies were sold with a total premium of Rs.44,611 crore between April 1, 2009 and Feb 28, 2010. The 14 insurance companies had an equity capital of Rs.16,281 crore as on March 31, 2009, it said.
The insurance regulator observed in a statement 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, IRDA added.
ULIP constitutes nearly 90 percent of the sales for many private life insurers. The industry average will be around 85 percent.
With this the turf war between the two financial sector regulatory bodies has intensified.
"The ULIPs launched by these entities were prima facie found to be akin to the mutual fund schemes and were launched without obtaining registration from the SEBI. ULIPs are a combination product and the investment component need to be registered with and regulated by SEBI," said Prashant Saran, whole-time member of SEBI, in the order.
IRDA said in a statement: "Policy holders of the Unit Linked Insurance Products (ULIPs) offered by different insurance companies are assured that these policies are safe and secure and the matters arising out of the recent orders of the SEBI will be addressed expeditiously in the appropriate forum in accordance with law."
The ban has come into force with immediate effect. The SEBI had issued showcause notices to all these companies in January.