The Securities and Exchange Board of India (Sebi) has barred asset management companies (AMCs) from offering bundled insurance products with their mutual fund schemes.
In a 17 June letter, which was addressed to the Association of Mutual Funds in India (Amfi), the markets regulator observed that some of the AMCs are proposing to introduce bundled products while some existing schemes have such bundles products, e.g. insurance features with scheme investments such as SIP Insure, etc.
“In this regard, it is informed that no existing schemes or one which are proposed to be launched shall have bundled products,” Sebi said in the letter.
The regulator has advised Amfi to communicate the decision to all the AMCs.
Mint had earlier reported that ICICI Pru MF’s SIP Plus, Nippon India’s SIP Insure, Aditya Birla Sunlife’s (ABSL) Century SIP and PGIM’s Smart SIP facility were the well-known systematic investment plan (SIP) schemes that combined investments with insurance. Currently, only Nippon MF continues to offer this product to its new customers.
Notably, Aditya Birla Sun Life Mutual Fund had earlier announced that it will be opening its Century SIP feature for new registrations from 16 June.
Usually, under SIP insurance plans, mutual funds offer a free life cover on starting SIP investments. The life cover, in most cases, was in the range of up to 100-120 times the SIP amount, subject to a ₹50 lakh limit.
For instance, an SIP amount of ₹10,000 per month could get you a free life cover of up to ₹12 lakh, subject to other conditions.
Many mutual fund houses had added insurance benefits at no additional cost to tap into its popularity.
However, experts suggest that investors should always separate their insurance and investment requirements.
“You never know, such bundled options can stop at any time. Go for term insurance if you have financial dependents. As far as investments go, analyze them separately and check their track record before investing,” said Viral Bhatt, founder, Money Mantra.