Life insurance companies are not in favour of SEBI's proposal that all cases relating to unit-linked insurance plans (ULIPs) be heard in the Supreme Court.
This must be seen in the context of the market regulator filing a petition seeking clubbing and transfer of two public interest litigations (PILs), filed in separate High Courts, to the Supreme Court.
According to the insurers, the PILs deal with different issues. While the PIL filed in the Bombay High Court sought the reversal of SEBI's ban on sale of ULIPs, the PIL filed in the Lucknow High Court was against insurance companies fleecing customers through ULIPs, said an official with a leading insurance company who did not want to be named. Besides, if the cases are heard at a High Court, the option of a right of appeal to the Supreme Court will still be open, the official said. SEBI had moved the Supreme Court last week seeking transfer of the two PILs filed in the Bombay and Lucknow High Courts to the apex court. The Supreme Court had issued notices to the Centre, the insurance regulator IRDA and the 14 insurance companies for their response.
It may be noted that while hearing the SEBI petition, the apex court had asked the regulator's counsel why the issue could not be heard by the Bombay High Court as several insurance companies and the watchdog were headquartered in Mumbai.
Regulatory Issues
The insurance regulator has already made it clear that it is opposed to the idea of solving jurisdiction issues through PILs as they address consumer interest issues rather than conflicts regarding regulatory jurisdiction.
Mr J. Hari Narayan, Chairman, IRDA, had recently told Business Line that the issues raised in the PILs have nothing to do with jurisdiction. “The issue here is of deciding SEBI's jurisdiction. These PILs do not have a direct bearing on deciding the jurisdiction,” he said.
The IRDA had instead suggested the filing of a joint application under the Civil Procedure Code. But the market regulator had not agreed on the grounds that the Code cannot decide jurisdiction issues between the two regulators.
According to industry officials, though all the 14 insurance companies will respond separately to the notice issued by the Supreme Court, they will have a common stance supporting IRDA as the sole regulator for policies sold by insurance companies.
Mr S. B. Mathur, Secretary-General, Life Insurance Council, said insurance companies will emphasise that the IRDA should be the sole regulator of ULIPs, when they make the submissions.
The Supreme Court has set the next hearing on July 8 and the insurance companies have time till then to formulate their replies.
While the matter is being heard in the court, the IRDA has also tried to make ULIPs more transparent.
It has asked agents to disclose the commission they are earning while selling the plans. It had also directed insurance companies to increase the life cover component in some of the ULIPs. Though the plans have been a bone of contention between the two regulators for some time, the issue flared up after the SEBI barred the 14 insurance companies from collecting fresh money under ULIPs. In response, the IRDA had asked companies to continue selling the plans, “notwithstanding” the SEBI order.
Ref :- http://www.blonnet.com/2010/05/06/stories/2010050653930100.htm
