SEBI Barred AMCs From Offering Bundled Insurance Products With mutual Funds

Asset management companies (AMCs) are no longer allowed to provide bundled insurance products with their mutual fund schemes, according to the Securities and Exchange Board of India (Sebi).

The markets regulator noted in a letter dated June 17 to the Association of Mutual Funds in India (Amfi) that certain AMCs are intending to launch bundled products, while some existing schemes already have them, such as insurance features with plan investments such as SIP Insure, etc.

“In this context, it is clarified that no existing or new schemes would include bundled goods,” Sebi stated in the letter.

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The regulator has advised Amfi to inform all AMCs of the decision.

The well-known systematic investment plan (SIP) schemes that linked investments with insurance were ICICI Pru MF’s SIP Plus, Nippon India’s SIP Insure, Aditya Birla Sunlife’s (ABSL) Century SIP, and PGIM’s Smart SIP facility, according to Mint. Only Nippon MF continues to sell this product to new clients at this time.

Aditya Birla Sun Life Mutual Fund, for example, has already stated that it will begin accepting new Century SIP registrations on June 16th.

In most SIP insurance plans, mutual funds include a complimentary life insurance policy with the initial SIP deposit. In most cases, the life cover was in the range of 100-120 times the SIP amount, subject to a limit of 50 lakh.

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For example, a monthly SIP of ₹10,000 might win you a free life insurance policy worth up to ₹12 lakh, depending on other factors.

To capitalise on its popularity, several mutual fund companies offered insurance coverage at no additional cost.

Experts, on the other hand, advise that investors keep their insurance and investing needs separate.

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“You never know when such packaged possibilities would come to an end. If you have financial dependents, term insurance is the way to go. Before investing in any assets, study them independently and check their track record,” stated Viral Bhatt, founder of Money Mantra.