IRDA VS SEBI

PRESENTED BY
GAVISH KUMAR B JAIN
 ULIPs
 ULIP is an abbreviation for Unit Linked Insurance Policy.

 A ULIP is a life insurance policy which provides a combination of

risk cover and investment.

 The dynamics of the capital market have a direct bearing on the

performance of the ULIPs.

 REMEMBER THAT IN A UNIT LINKED POLICY, THE

INVESTMENT RISK IS GENERALLY BORNE BY THE
INVESTOR.
 TYPES OF ULIPS FUNDS
General Description Nature of Investments Risk Category

Equity Funds Primarily invested in company Medium to High

stocks with the general aim of
capital appreciation

Income, Fixed Interest and Bond Invested in corporate bonds, Medium

Funds government securities and other
fixed income instruments

Cash Funds Sometimes known as Money Low

Market Funds — invested in cash,
bank deposits and money market
instruments

Balanced Funds Combining equity investment with Medium

fixed interest instruments
 IRDA VS SEBI
SEBI ON ULIPs
The SEBI passed a stunning order of
banning 14 life insurance companies
involved in serving ULIP products, on the
ground that they were akin to mutual
funds and may need to obtain
registration from SEBI to proceed
further with it.
IRDA ON ULIPs
In a reaction to the SEBI order, IRDA
retaliated on Saturday by invoking its
power under section 34(1) of the
Insurance Act, directing insurance
companies to disregard the order from
SEBI and proceed further with their
business as usual.
 THE 72 HOUR STANDOFF
 APRIL 9: Stock market regulator SEBI bans 14 life insurance
companies from selling ULIPs with immediate effect

APRIL 10: Insurance regulator IRDA asks insurance

companies to ignore SEBI order and carry on business as
usual

APRIL 12: Government brokers peace between SEBI and

IRDA. Ban on sales and renewal of Ulips lifted
 
 At, present the case is in Supreme Court, India and the
final decision on ULIPs will be taken by the Supreme
Court.
 LIST OF COMPANIES WHICH BANNED BY SEBI

A. Aegon Religare Life Insurance Company Limited

 
B. Aviva Life Insurance Company INDIA Limited
 
C. Bajaj Allianz Life Insurance Company Limited
 
D. Bharti Axa Life Insurance Company Limited
 
E. Birla Sun Life Insurance Company Limited
 
F. Hdfc Standard Life Insurance Company Limited
 
G. Icici Prudential Life Insurance Company Limited
 
H. Ing Vyasa Life Insurance Company Limited
 
I. Kotak Mahindra Old Mutual Life Insurance Limited
 
J. Max New York Life Insurance Co. Limited
 
K. Metlife INDIA Insurance Company Limited
 
L. Reliance Life Insurance Company Limited
 
M. Sbi Life Insurance Company Limited
 
N. Tata Aig Life Insurance Company Limited
 
The question that arises for my consideration is whether
ULIPs offered by the said entities are a combination of
investment and insurance and if so whether the investment
components are in the nature of mutual funds which can only
be offered/launched after obtaining registration from SEBI
under section 12(1b) of the SEBI act?
 ISSUES INVOLVED IN ULIPs
A. The product is unit linked and money is raised from public through sale of
units to them.

B. The investment risk in chosen investment portfolio is borne by investors.

C. Upon untimely death before the expiration date of the policy the policy holder
will be paid either the NAV (Unitized Fund Value) or the sum assured
whichever is higher.

D. Upon survival at the maturity of the policy, the policy holder will be paid the
NAV (Unitized Fund value) of the investments.

E. Premium will be used to allocate units in the fund chosen by the investor.

F. The product has characteristics such as fund management, fund management

charges, switch and partial withdrawal options.
 Issues involved in ULIPs( cont)

G. unit linked life insurance products are different from traditional

insurance products and are subject to risk factors.

H. the premium paid in unit linked life insurance policies are subject to
investment risks associated with capital markets and the unit price of
the units may go up or down based on the performance of the fund
and factors influencing the capital market and the
insured/policyholder is responsible for his/her decisions.

The Above Mentioned Points Clearly Say’s That

ULIPs Is A Combination Of Insurance And
Investment.
 ARGUEMNET BY THE ENTITIES
ARGUMENT 1:
 
Some of the entities have pleaded that the
regulations issued by IRDA are special laws for
ULIPs and SEBI cannot apply the general laws
applicable to tradable securities such as
collective investment schemes or mutual funds
to ULIPs.
 CONT……

ARGUMENT 2:

 
It is also contended that a mutual fund is a
fund established in the form of a trust for
raising money through the sale of units
through the public and established under one
or more schemes for investing in securities.
 CONT…..
ARGUMENT 3: 

It is also contended by the said entities that

ULIPs are predominantly life insurance
products having an investment component.
 CONT….
ARGUMENT 4:
 
The entities have contended that the
predominant feature of a ULIP is insurance
cover which is dependent on human life and
the mere existence of an additional investment
feature cannot convert a ULIP into a mutual
fund. Further, it has been said that ULIPs have
a mandatory insurance cover which forms a
vital and inseparable part of every ULIP.
 CONCLUSION

In view of the above, I conclude that ULIPs

offered by the said entities are a combination
of investment and insurance and, therefore,
the investment components are in the nature
of mutual funds which can only be
offered/launched after obtaining registration
from SEBI under section 12(1B) of the SEBI
Act.
THANK YOU