Securities and Exchange Board of India (SEBI) has demanded explanation from HDFC Standard Life regarding the absence of life insurance cover under its pension plan.

SEBI seeking product details from a company which comes under the domain of the insurance regulatory and development authority could raise issue of regulatory turf since insurance companies are allowed to sell products only after a stringent approval process by IRDA.

However, HDFC Standard Life Insurance declined to comment on the issue. Sources said that since the pension plan like all other products had to take IRDA's approval, the regulator might take up the matter with SEBI later.

With the introduction of unit-linked insurance plans (ULIPs), there is no stark difference left between a mutual fund company and a life insurance company.

To differentiate between the products IRDA has prescribed minimum lock-in period for life insurance companies. Life insurers are surprised by Sebi's move to target HDFC Standard Life alone since all life insurers sell similar pension plans without any life cover.

"The need for a minimum life cover for an insurance policy stems from the Income Tax. Section which allows tax breaks only if there is a life cover which is at least five times the sum insured. However, this section does not apply to pension plans" said the chief executive of a life insurance company.

Without the tax breaks provided under section 10(10)D of the IT Act, the maturity amount would attract to income tax. This section (which prescribes minimum sum insured) however is not applicable for pension plans.

"No pension plan in India, whether regulated by the IRDA or by PFRDA is aimed at providing protection. Pension plans are governed by a different tax regime and all products are cleared by regulators" said the chief executive of another life insurance company.