Sebi mulls combo product of term life insurance and MFs for investors

Capital markets regulator Sebi is planning to come out with a new combo product under which mutual funds can pair investments with life insurance, its chief Madhabi Puri Buch said on Friday. She, in an event organised by ICAI, revealed that the regulator will soon come out with a consultation paper on the proposal.

Currently, many financial products already bundle insurance and investment options together.

Sebi is working on a new product under which investors will have an option to pair mutual fund investments with life insurance. The product is central to the regulator's mission of expanding financial access, especially in underserved areas.

Buch, whose three-year term ends on February 28, explained that the initiative seeks to address the needs of investors, particularly in rural areas, where there is a significant potential to grow systematic investment plans (SIPs), but the current value of investments remains low.

Through this product, she hopes to provide a more attractive, affordable offering that reaches a broader segment of the population. The added benefit is that the marginal cost of the additional life insurance premium would be minimal, considering the existing expenses related to investor onboarding and servicing.

"We are now proposing to come out with a consultation paper again, to try and include insurance pure and simple vanilla life, term life insurance, along with our mutual funds, which is our main product for financial inclusion, and so that we are able to go, including to people where we have very, very low value SIPs coming from the hinterland, and to be able to offer them a combo product of term life insurance along with the mutual fund investment," Buch said.

This new initiative aligns with Sebi's ongoing efforts to tailor financial products to market needs and drive growth in the investment space.

In addition to this, Sebi is also focusing on leveraging technology to enhance trust in the financial ecosystem.

The regulator is planning another consultation paper aimed at improving the safety and reliability of financial transactions made by investors.

The proposed "Pay Right" initiative will enable investors to verify the authenticity of the UPI (Unified Payments Interface) ID they are transferring money to, through robust KYC (Know Your Customer) due diligence. This measure is designed to combat the growing threat of digital fraud, ensuring that investors can confidently confirm they are making payments to legitimate recipients.

Buch emphasized the importance of marrying technology with trust, saying that this new step would help distinguish legitimate financial intermediaries from fraudsters and reinforce investor confidence in the digital ecosystem.

The regulator also touched upon the topic of digital assurance.

With these initiatives, Sebi aims to enhance the financial inclusion of Indian investors while tackling issues related to trust and security in the rapidly evolving digital landscape.