Significant Reversal

*Life Insurance Council had decided to discontinue the offer of group life insurance cover on MF products from October 1, 2008

* Insurance regulator IRDA has asked life insurance companies to put the decision on hold

*The IRDA fiat will come as a major relief to some fund houses involved in selling schemes bundled with insurance cover

"IRDA has advised the Life Insurance Council to review and put on hold the decision to discontinue offer of group cover," a SEBI release said. The council had earlier decided that the insurer would not sell group covers to mutual funds that bundle life insurance with units and thereby create competition for ULIPs. The IRDA fiat will come as a major relief to some fund houses involved in selling schemes bundled with insurance cover, said an analyst.

The decision taken by the Life Insurance Council, a self-regulatory body, was significant since some of its members have a common parentage with asset management companies (AMCs). AMCs have been complaining about life insurers invading their turf with unit-linked insurance plans with a predominant equity bias.

Association of Mutual Funds in India (Amfi) had recently approached market regulator SEBI to permit them to sell insurance products to their investors and collect premium from them.

However, according to insurers, present insurance regulations require them to maintain a solvency margin of 150 per cent, which is much higher than the capital requirement norms for fund houses.