THE decision by market regulator Sebi to allow investors get into mutual funds (MFs) with variable entry charges has put the spotlight on the life insurance industry.

For years, fund managers in asset management companies (AMCs) have accused the life industry of imposing higher charges on unit-linked insurance plans vis-à-vis mutual funds. Insurance regulator IRDA has also warned the industry to brace for ceiling on charges.

However, life insurers rule out any zero-entry load in the life insurance business. “Most of the business in life insurance comes from individuals, with MFs it is largely institutional money. There are some distribution costs in life insurance which just cannot be avoided,” said Gaurang Shah, MD, Kotak Mahindra Life Insurance. SB Mathur, secretary, the Life Insurance Council, an association of life insurance companies, said the life industry has to mandatorily distribute 18% of its policies in rural areas and also provide cover to the underprivileged. “If there is an attempt to put restrictions on costs, life insurance, too, may end up being an urban business,” said Mr Mathur. He pointed out if charges were reduced, some of the fixed costs such as stamp duty (Rs 40 per Rs 1 lakh) would have to be passed on to the customer.