Why Should Insurance Be Sold Differently From Mutual Funds?

A.P. Kurian
Title: Chairman of Association of Mutual Funds in India (AMFI)
Age: 77
Career: After being the executive trustee with UTI he took official charge of AMFI in 1998
Education: MA in Economics, Kerala University
Interests: Walking, listening to old Hindi and Malyalam songs, involved in social activities

What have been your biggest achievements at the Association of Mutual Funds in India (AMFI)?
There are many that I can think of. AMFI was able to get in world class standards for Indian mutual funds. We were able to bring in a lot of transparency to the industry. Earlier portfolio disclosures were irregular or given on a six-monthly or annual basis. Today mutual funds disclose portfolios on a monthly basis. Then we started the AMFI certification which was later on notified by Securities and Exchange Board of India (SEBI) in the year 1999-2000. The distributor community was asked to take this test to become AMFI-certified. Till now four lakh people have taken this test and half have passed. And I think we are one of the very few countries where mutual fund net asset value (NAV) can be provided on a single platform. In most countries you will have to call the mutual fund individually.

Investors will now have to give two cheques to the financial advisor when they buy funds - One for investment and the other for advisory. How do you look at this situation?
We have a completely different view. In order to make commission transparent, we suggested an open architecture. While filling the form, the investor can make it clear how much should be passed on to the distributor or advisor and write in the broker code on the form. This way, there is no need to write another cheque. Our suggestion did not work well with SEBI.

What is your view on the way unit linked insurance policies (ULIPs) are sold in the country?
I think whatever standards they are using to sell mutual funds should be applied to all the products. Why should post office schemes, fixed deposit schemes or for that matter insurance products be sold differently than mutual funds? Every financial product in the country should be subjected to the same standards and regulations. It should become a system acceptable to the entire community. But I’m optimistic. The level playing field will come in some time.

What is your analysis of the Indian investor?
The Indian investor has become conscious. Over the years, in my observation, his level of understanding [of] complex financial products has gone up. Earlier the guy used to invest into fixed deposit schemes and post office schemes. But today he is moving to slightly risky investments. We have around 48 million mutual fund accounts. If we remove the double counting, we get 30 million individual accounts for mutual funds. This number has to go up.  

Is there anything that you left incomplete?
The biggest challenge for mutual funds is investor education. This I think is work in progress. We need to educate the Indian investor to understand financial products. Making people aware about
these products is the biggest challenge.