Using game theory in the Sebi-Irda dispute

Expense Account, Mint

The spat between the insurance and the capital market regulators is now at a critical stage of a game theory experiment. While the regulators are debating the location of the court where the dispute will be heard (the insurance regulator does not want Mumbai where the judge may actually understand finance), insurers are debating whether to carry on with the launch of new investment-linked products.

From what I understand, the debate in the insurance industry is to figure out how far the Securities and Exchange Board of India (Sebi) will go in carrying out its threat of banning new unit-linked insurance plans (Ulips). And what form that ban will take. If the Insurance Regulatory and Development Authority (Irda) were to approve new Ulips, as it has said in repeated press statements that it will, it would be a violation of Sebi’s quasi-judicial order. An ex-regulator tells me that if there are two laws, one that says you can do something and another that says you can’t do that particular thing, the one that says you can’t will prevail.

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Difficult to sell, Ulip turns out to be a lemon

Expense Account, Mint

So it comes to pass. The ministry of finance, which could have laid to rest the uncertainty that faces millions of retail investors, in the best tradition of bureaucratic ennui, has passed the buck to the courts to sort out the differences between the capital market and insurance regulators. While the post-retirement sinecures are no longer at threat due to bold decisions the ministry could have taken, this example of cynical buck passing will cost India in terms of the lost opportunity of fixing the retail financial market.

The seeds of the conflict between the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority (Irda) began when, around 2002, the insurance regulator suddenly banned life insurance companies from outsourcing fund management to asset management companies.

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Middle-class kids lack a challenging environment

Expense Account, Mint

Will middle Indian kids lose their edge as newly wealthy parents rush to remove all roadblocks?

The neighbourhood kid comes home to borrow a DVD. He’s home in transit. From Hyderabad, where he worked for the past two years, on his way overseas to study some more. He was bored of his job here and wanted to do something different. The hard-working, indulgent father paid up for a one-year gig. Of the old school, he thinks nothing of breaking a few fixed deposits to do what was till 10 years back impossible for a middle-class family—fund your child to go abroad to study. Kid is still bored. Already. Of the course he will go to. Of the whole overseas learning that is yet to come. Of the international class he will be a part of. Of the job he knows he will get. Of life. Yawn. Bored to death!

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