Mutual Funds V/s Insurance Industry in India
U K Sinha, CMD, UTI Asset Management Company, feels the rules need to change vis-à-vis the insurance industry.
There is a regulatory bias against the MF industry vis-à-vis its closest competitor — the insurance sector. While regulations are becoming far more strict for MFs, they are far more liberal in case of the insurance sector. MFs are mandated to comply with the knowyour-customer (KYC) norms, PAN requirements and are even subject to annual information return (AIR) disclosures in the tax returns.
However, no such regulations have been mandated for the insurance sector. Besides, in contrast to the MF industry where not only the distribution but also the management charges are capped by the regulator, the insurance industry has a far more liberal regime for charges, allowing it aggressively market its products and have a better distribution network.
Sebi, for instance, doesn’t allow mutual funds to advertise in the media with celebrities. The insurance industry doesn’t have a similar restriction.
Michael Said,
March 13, 2009 @ 5:32 am
The progress of these two industries is by no means mutually exclusive, in fact, it’s the opposite. As FDI caps are loosened in the insurance sector and larger institutional investors enter the domestic equity markets in India, both industries will benefit significantly. Life insurance is set to explode in India over the next 3 - 5 years.