The Union Government's course of action (though action may not be the right word) on the Ulip (unit-linked insurance plan) crisis reminds me of this joke from my schooldays. Some of you must be familiar with this famous couplet of the 15th century mystic poet Kabir: Kaal kare so aaj kar, Aaj kare so ab; Pal mein pralaya hoyega, Bahuri karoge kab. And then there was the schoolboys' parody, which you may or may not be familiar with, depending on what kind of schoolboys you hung around with: Aaj kare so kal, kal kare so parso; Jaldi kis baat ki hai bhaiyya, abhi jeena hai barson.
Even though the flavour of the originals may be lost in translation, here are rough translations for non-Hindi speakers. Kabir's original admonition goes as follows: “Tomorrow's work do today, today's work now; a catastrophe could happen anytime, when will you finish the work then.” The parody goes as follows: “Today's work do tomorrow, tomorrow's work the day after; What's the great hurry, when you have years to live.”
The first couplet describes what the government claimed it would do about the Ulip crisis three weeks ago; the second couplet is a better fit for what has transpired. Three weeks ago, when the Securities and Exchange Board of India (Sebi) first turned the screws on insurance companies, we heard that the issue would be resolved with great urgency. The Finance Minister himself was said to have played a role in the decision that the two regulators or the government would quickly approach an appropriate court of law and the matter would be resolved. The Finance Secretary appeared in public and appeared to endorse this.
Three weeks later, there has been no joint action. Instead, public interest litigations (PILs) have been filed around the country whereby petitioners have asked the courts to intervene. Since then Sebi has filed a petition in the Supreme Court (SC) asking that these PILs be bundled into a single matter to be decided by the SC. In its petition, Sebi has also bundled up a variety of other issues. The SC justices, on their part, have issued notices to the actors in the drama and have set a date three months ahead. That's it. Now, everything is in a limbo till July.
Meanwhile, the investing public doesn't know what is what. One arm of the Union Government (Sebi) says that Ulips should not be sold (in its petition Sebi has accused insurance companies of fraud) and another arm of the Union Government (Irda) says that these are properly designed, investor-friendly products and there's nothing wrong with them. And now this impasse will continue for God knows how long while the legal case winds on.
Make no mistake, this issue should never have gone to the courts at all. Who should regulate Ulips and whether these are insurance products or investment products should have been decided by the executive. The fact that Ulips are primarily investment products with a small dose of insurance should have been noted and resolved years ago, when these products first started coming into prominence. Now, years have gone by, lakhs of crores of rupees of investor money has been poured down the drain and the official machinery is still not willing to take a view. They'd like the problem to go away and be solved by the courts or someone else.
The way things are heading, we aren't moving closer to a resolution at any appreciable speed.
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