The issue was not whether ULIPs need better regulation, but the manner in which SEBI moved into IRDA’s turf
As far as the SEBI-IRDA turf battle is concerned, the first indicator that the government had changed its mind came from Deepak Parekh, chairman of HDFC on 31st May. He said, quite correctly, “Tell me, where in the world you see two regulators fighting... we have become a laughing stock.” This has been the Moneylife stance as well.
The issue was not whether unit-linked insurance products (ULIPs) need better regulation, but the manner in which SEBI moved into IRDA’s turf and how the two regulators were then asked by the finance minister to go to court to decide jurisdiction issues.While inaugurating the insurance institute in Mumbai, the finance minister admitted that the issue would be settled soon. More importantly, Pranab Mukherjee signalled that he understands the role of three lakh insurance agents in reaching out to Indians in non-urban centres as well, and also that these agents cannot be expected to work without a commission.
Clearly, this is a major rethink on the Swarup Committee’s recommendations about paying zero commissions on financial products. Hopefully, the failure of the New Pension Scheme to attract investors, even after the government offered to put Rs1,000 in each NPS subscriber's account, has opened the eyes of bureaucrats operating out of ivory towers. The turmoil in the mutual fund industry after scrapping entry-loads ought to have been another wake-up call. The government insists on learning through mistakes and harassment rather than through discussion with stakeholders. — Sucheta Dalal
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