Mumbai: Mutual Funds will have to obtain a licence from the Insurance Regulatory and Development Authority to sell unit- linked insurance plans and comply with solvency requirements, said Mr J. Harinarayan, Chairman, IRDA.
The comment from the Chairman of the insurance regulator comes in the wake of the mutual fund industry’s demand to sell equity products bundled with insurance.
“Mutual Funds are welcome to sell unit linked insurance products (ULIPs) after ensuring full compliance to the regulation of the Insurance Regulatory Development Authority. Mutual funds would need to obtain a licence and meet the solvency requirements of the IRDA,” Mr Harinarayan told reporters on the sidelines of a felicitation ceremony organized by MET.
“These steps would be necessary to protect consumer interests,” he added.
At present, the capital requirement norms for insurance companies are much higher than those required by a mutual fund. Also, insurance companies are regulated by IRDA whereas mutual funds are regulated by SEBI.
Insurance companies have been firmly against mutual funds selling such bundled insurance products.
The Life Insurance Council, the self-regulatory body representing insurance companies, has been in dialogue with the IRDA about the issue. Insurers say that they have to comply with several guidelines such as rural and social sector requirements, which mutual funds don’t have to. Besides, ULIPs can be sold only by licensed intermediaries like insurance agents who have to undergo 50 hours of training.
Policy wordings
IRDA is working with general insurance companies for modifications in the wordings of policies. Mr Harinarayan said greater flexibility would allow insurance companies to introduce new products and improve the quality of their own policies through simplification of language.
The new Chairman, who took over from Mr C.S. Rao in June this year, said the general complaints received by IRDA related to administrative problems, issues regarding claim settlement and interpretation of wordings of clauses.
