ULIPs Redefined in India
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Case Code: INS055 Case Length: 12 Pages Period: 2011 Pub Date: 2011 Teaching Note: Not Available |
Price: Rs.400 Organization: Insurance Regulatory Development Authority of India Industry: Insurance Countries: India Themes: Government & Economy |
Abstract Case Intro Excerpts
Introduction
When unit-linked insurance plans (ULIPs) were introduced in India, in 2001 as an alternative to traditional insurance plans, they quickly garnered customer loyalty.
ULIPs offered insurance like security, stock-market like returns and banking products like partial liquidity in a single plan.
Insurance companies specifically designed these plans in such a way that part of the investment was used to provide life cover and the residual portion was invested in a fund, which in turn was invested in stocks or bonds as specified by the policy holder.
The value of investments depended on the performance of the underlying fund opted for by the insured. ULIPs were regulated and controlled by the Insurance Regulatory and Development Authority (IRDA) of India.
However, as part of the ULIP premium was invested in stock markets, the Securities and Exchange Board of India (SEBI) sought to get ULIPs under its purview in April 2010.
The IRDA objected to SEBI's move and subsequently, control over ULIPs became a bone of contention between the two regulatory authorities necessitating judicial intervention.
The Law ministry issued an ordinance in June 2010 in favor of the IRDA argument for control of ULIPs. Following the ordinance, the IRDA redefined ULIPs...
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