IRDA vs. SEBI

If the heading sounded like two middle aged, over weight aunties in your neighbourhood, Mrs. Irda (south Indian cousin of Mrs Iyer) and Mrs Sebi (a foreign returned rechristened form of Mrs. Sabharwal) swearing at each other or two foster mothers fighting over a million dollar orphan, dont blame yourself. It could mean different things to different people. But for starters & other oblivious gentry let me explain the non delusional, simple, straight and in your face truth to you– it is a legal dispute between India’s two powerful regulatory bodies. Ok..so you have heard that one before. But this gets interesting from here. Mrs. Sebi is a sort of capital market watchdog, controlling mutual funds and investment schemes whereas Mrs. Irda has her jurisdiction over insurance portfolios or any product that includes the term 'insurance' in it, suo moto so it seems. The bone of contention here is an investment product called unit linked insurance plans (ULIPs). Mrs. Sebi points out that Ulips are just like any other MFs hiding behind the garb of insurance, hence she has the right to regulate it. Irda, on the other hand, has made her stand clear without much fuss. According to her, since Ulips are being sold as an insurance component, regulating that is her job and Sebi better get off her porch before she legally shoots her down. Sebi remains undeterred and stands her ground stating the Sebi Act, which brings any product with exposures to securities market under her purview. She has gone ahead and banned 14 insurers for not treading her path. The big fish among them is India’s life support, LIC. These were the facts. Now, some speculation. If one scratches the surface a little, one senses a hint of foul play. LIC has been building up funds even before the opening of insurance sector. It would be stupid to think that it wasn’t investing all that dough into securities and other fund raising schemes without the knowledge Sebi. But no one heard Sebi aunty’s bandwagon back then.
But again, if the current mess is genuine, it’s a timely reminder of India’s porous regulations that can be twisted and twirled as per one’s interests and intentions and therefore need some tightening. A more serious concern is that of insiders, who fear it is a deliberate attempt to create a public space for ‘super-regulator’ or a ‘father of all regulators’ which was lightly mentioned in the budget by the FinMin, overseeing such future disputes. Now I am not an out-and-out supporter of the laissez-faire model but having grown up watching the redundancy and the ineffectiveness of myriad government control rooms in the past, I would rather take orders straight from the two neighborhood aunties than add an extra Supervisor Uncle for clearance.
Leaving the hypothesis aside, if any current Ulip policyholder is reading this entry, I want you to follow the advice of experts on this: continue paying your premiums for the full term of the policy. If you leave it mid way, you could end up losing heavily. And for those who have no direct implications from this development, just sitback and savour the cat fight.