Amazing to see a pattern in the working of a Regulator… thing common to all the regulators is that they speak the language of the strongest player!

When SEBI was formed and it took charge of the mutual fund space, there was only ONE mutual fund – the UTI. So there was a tussle between SEBI and UTI, but not really nothing spectacular. Then SEBI brought in many Mutual fund laws – and all the schemes of UTI were also brought in under the purview of SEBI. At this stage the mutual fund industry was dominated by the UTI.

New mutual fund houses were born and they were just trying to establish themselves. EXACTLY at that time the UTI ’64 scam happened – 1998 or thereabouts.

Sebi brought in a rule in 2001 that only a person who had passed the ‘AMFI exam’ as it was then called could sell mutual funds. UTI said ‘please allow our existing agents to sell’ – SEBI said NO.

Cut to IRDA. Irda also said ‘all agents should have passed the exam’. LiC said ‘Our agents will sell without the exam’. Irda said ‘fine’.

This was a very big advantage for LiC – which did not suffer like UTI.

Cut to 2004. Hdfc Standard Life launched a Term Insurance plan along with Riders. These riders were very attractive for the customer. LIC felt threatened. IRDA changed the law to say that the Rider Premium cannot exceed the Main Policy premium. Simply because at that stage LiC did not have enough riders. I have no clue how much change has happened since then.

The ULIPs of 2004 had a clause by which you could do a tremendous amount of top up (I have such a plan). This allowed you to dramatically reduce the COST of the load – because the loads were only 1% of the top up.

So technically you could take a ULIP – with say Rs. 1 L premium (paid 8k per month), and sum assured Rs. 20L. Then you could top it up with say Rs. 3L – AFTER PAYING JUST Rs. 8000 as regular premium! The load on the regular premium was 40%, but on the top up only 1%. Thus your total costs came down dramatically.

Again since the most powerful player COULD not play the fund management game, this was also LOST TO THE CUSTOMER.

Of course nothing of this was told out loud…so people do not know why the changes happened. You could only speculate.

However for the observant, it was becoming clear..and like a Ex Journalist friend told me, I realised that “the Regulator speaks the language of the strongest player”….

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