The new concept of mobilizing funds from the public for the purpose of investing in mutual funds along with insurance coverage, gained momentum in a big way. The 14 insurance companies could mobilize huge funds under this scheme before march,2010. However the sebi has applied its powers to regulate the scheme stating that the funds are covered by its powers since the funds are used for investing in equity through mutual funds as the mutual funds activites are regulated by the sebi. Consequently newly issued products were not permitted and the existing scheme was also not cleared. The insurance companies claimed that they are not regulated by sebi whereas the sebi claims that since the funds routed for mutual funds those are to be regulated by the sebi.
The salient feature of the scheme is the amounts collected are for both insurance and investment in mutual fund. The major portion approximately 70% for mutual fund and the balance of the amounts consists of insurance premium and commission payable to the agents. Hence the insurance portion is only 3% to 4% towards insurance. If the premium portion is to be enhanced to 7.5% to 10% it need very very high sum assured. Hence the suitable regulatory can be sebi only but not irda as claimed by the insurance companies. The mobilization of funds under this scheme became more popular and attractive due to high returns assured. However, the source for assured high returns is not clear. It means that the mechanism is to mobilize funds without attracting the sebi regulations which is very dangerous.
Assuring high returns without sufficient assurance of incomes there from is nothing but duping the depositors for innocence in the name of financial institutions, insurance companies and according to the authorized guidelines of irda.
The mobilization of deposits under this scheme is more against risky incomes.
Now, the central govt. Has given a clarification stating that ulips are regulated by irda only. In other words, the ulips are outside the purview of the sebi.
The clarification is totally baseless, it is evident that the insurance companies intends to escape from the sebi regulations which is mandatory for every mutual fund activities.
More and more stringent regulations are required for such schemes, whereas the govt. Is trying to overcome the sebi guidelines. More and more responsibility and accountability is required for monitoring such attractive schemes whereas the clarification is overlooking the seriousness.
Under the circumstances of stock markets subject to rumours and not reflecting the industrial performances, the utilization of collected funds for earning high is also questionable. Here the outgoing is assured whereas the returns are uncertain. This situation is very dangerous. It needs some check and assurance of returns as assured to the policy holders and sufficient apportionment and regular stragies for effective utilization of funds.
