Context:
The mutual fund insurance combo has again found itself in deep trouble with the industry. This is primarily due to worries regarding product complexity and operational tangle, leading generally to shelving the idea.
Industry Reservations & Challenges
- True to Label Investment Concern
- SEBI’s MF advisory committee believes that MFs should remain pure investment products without additional insurance features.
- Operational Burden
- The inclusion of insurance would complicate claim processing, increasing workload for fund houses and distributors.
- Past Experience
- Earlier, many such combo products were available till June 2022, when SEBI banned them on account of structural concerns.
SEBI’s Intent & Market Expansion Goals
- Proposed by Former SEBI Chairperson Madhabi Puri Buch (January 2025) to make investments more affordable and accessible.
- MF Industry Growth & Challenges
- Despite rapid expansion, mutual fund penetration remains concentrated in top cities.
- Investor Base Expansion Efforts
- Such initiatives like reducing the minimum investment from ₹500 to ₹250 are meant to attract a large retail market.
Current Status & Future Outlook
- “Work in Progress”
- SEBI had been evaluating recommendations from the Association of Mutual Funds in India (AMFI).
- Impact of Leadership Transition
- With Tuhin Kanta Pandey replacing Buch as SEBI Chairperson, the possible fate, of the combo product, remains uncertain.
- Regulatory Landscape
- Under Buch, fast track regulatory changes shaped the MF industry—her exit might slow down or alter policy directions.
The MF insurance combo product literally seems to have gone onto a candle shelf, failing to kindle support from the industry. Operational and regulatory challenges, though, count for more than pros that SEBI could throw behind broadening MF adoption. Therefore, it would be doubtful whether revival could take place with changed leadership.
Source: BS
