The ongoing spat between the markets regulator Sebi and the insurance regulator Irda over regulation of unit linked insurance plans (Ulips) will benefit the investors in the long term as they may have to pay lower charges and commissions.
The hope for this has increased after finance minister Pranab Mukherjee exhorted financial sector regulators on Monday to move towards a ?no load plus fee? for financial products. This was one of the key suggestions of a committee chaired by D Swarup, former chairman of the Pension Fund Regulatory and Development Authority (PFRDA), which submitted its report last November.
?It is interesting that this crisis (over regulation of Ulips) has generated this debate. The long term beneficiaries in the entire episode will be the investors. In our report, we have suggested a no load but fee based model,? Swarup told FE on Thursday. Mutual funds and pension funds are currently no-load products but Ulips continue to charge high commissions. Sebi has removed load on mutual funds last August. The Swarup-committee suggested in its report that all retail financial products should go no load by 2011.
It also recommended that upfront commissions in the premium paid be cut immediately to 15%, and further to 7% in 2010 and zero by April 2011. However, Swarup said it would be difficult to convince Irda, which had then issued a dissent note to the report. ?Something which should have been done four months ago is being considered now. But Irda is not going to give up so easily. Ultimately, Irda has the powers to issue directions that insurance companies should remove load,? Swarup said. Life Insurance Council secretary general
SB Mathur said it would be unreasonable to flatly compare Ulips and mutual funds.