Mutual fund industry has proposed that the market regulator Securities and Exchange Board of India allow mutual funds to offer insurance cover to investors along with their regular schemes.

Association of Mutual Funds of India chairman A P Kurian said mutual funds may be allowed to sell insurance cover by tying up with insurance companies. As per the proposal, the insurance premium under these schemes would be collected separately.

Asked whether the proposal is meant to counter Ulips--unit-linked insurance products--being offered by insurance companies which have become a big hit with investors, he said "the idea is to provide additional facility to investors."

If allowed, mutual funds may come up with different insurance covers tagged with their products. Like, if an investor stays with a scheme for three years, he would be offered a certain insurance cover. If he stays for five years, he may be offered a more attractive cover.

Asked whether Sebi is likely to accept the demand, he said AMFI has made the suggestion. Sebi is thinking over it.

Asked for comment, Waqar Naqvi, CEO of Taurus Mutual Fund, said mutual funds are facing more competition from insurance companies than rival mutual funds.

There is an unfair playing field. Either insurance companies be stopped from selling Ulips or mutual funds be allowed to sell products having insurance component, he said.

A section of insurance industry, however, is reported to be against the AMFI proposal.