The Parliamentary Standing Committee on Finance headed by BJP leader, Murli Manohar Joshi, has expressed ‘annoyance’ over the SEBI-IRDA fracas and feels that the “key financial regulators appointed by government being at loggerheads on an issue concerning large number of investors and subscribers is very unusual and extremely disquieting.” Further, it has given the finance ministry a month to report back on the steps taken to resolve the dispute. But, so far, the two regulators still seem headed to court, with SEBI (Securities and Exchange Board of India) filing caveats in various jurisdictions.
A few years ago, the parliamentary standing committee used to command fear and respect among regulators and intermediaries. A few weeks from now, we will know if it still does. Even if the issue lands in court, there is a good chance that the court will ask them to sort out the issue among themselves. And when it comes to a negotiation, it seems clear that the Insurance Regulatory and Development Authority (IRDA) will have to yield some ground. After all, ULIPs have been around for a decade without SEBI showing any inclination to regulate them. It is only when IRDA refused to slash costs and commissions on ULIPs to ‘zero’, leaving SEBI looking foolish over its action against mutual funds, that the turf war began.
The insurance industry has now launched a campaign to educate the media about insurance and hold seminars to explain ULIPs. The product is rather difficult to defend; every financial advisor concedes this fact. IRDA is always far too slow to crack down on several dubious practices. For instance, Moneylife has reported several cases of insurance products of established entities such as LIC, Bajaj and SBI being sold through the shady multi-level or chain-marketing route. When contacted, these companies either feign ignorance or refuse to respond. IRDA does the same; its system of responding to media queries is selective and poor. IRDA regulates an industry whose products provide a safety net for individuals and their dependents and there must be no ambiguity about whether the regulators’ sympathies lie with the insurers or the insured. — Sucheta Dalal