LIC said USTR's views are based on an incomplete understanding of Indian insurance regulation and LIC's functioning.
State-owned Life Insurance Corporation said on Friday it has never invoked the sovereign guarantee for its policies, nor used it as a marketing tool.
India's largest insurer said it operates in a fully competitive market alongside 24 private companies.
It made the statement after a report by the office of the United States trade representative (USTR) said India maintains an uneven playing field in insurance.
LIC is regulated by the Insurance Regulatory and Development Authority of India and the Securities and Exchange Board of India and does not get any privilege.
'...LIC is treated like any other insurance company by the Government and Regulators.
'The guarantee -- provided at the time of its establishment in 1956 -- is a statutory provision designed to build public confidence in the early years of nationalisation.
'It has never been invoked or used as a marketing tool or provided any undue advantage to LIC.
'LIC's leadership in the insurance sector is entirely due to the trust of its policyholders, its commitment to service excellence, and its financial strength and transparency.
'With a legacy of over 69 years, LIC continues to serve over 30 crore [300 million] customers across India with dedication and professionalism,' it said.
The USTR report said that Indian State-owned insurance companies are not subject to the same law and 'prudential supervision' as private firms and enjoy various government guarantees.
The Indian government maintains an explicit sovereign guarantee on every LIC policy.
As a result, many customers choose to buy LIC policies over those offered by private insurers, giving LIC an unfair competitive advantage, said the report.
LIC said USTR's views are based on an incomplete understanding of Indian insurance regulation and LIC's functioning.
'We urge for a more balanced and factual appreciation of LIC's role and contribution to financial inclusion and policyholder protection in India,' it said.
There are 25 companies in the life insurance sector; LIC is the only one owned by the State.
Despite the presence of 24 private life insurance companies, LIC has a significant portion of the market. That's largely due to its distribution strength, which is driven by agents.
LIC has over 1.4 million agents, while the 24 private sector companies combined have 1.61 million agents.
The USTR report also said that Indian regulations give the country's reinsurers a mandatory first order of preference (or right of first refusal) in the reinsurance business.
This results in unequal treatment for foreign reinsurers and consolidates risk in a small number of Indian reinsurers, which is counter to global best practices of global diversification of risk.
In India, State-owned GIC Re is the only domestic reinsurer, which has been in the business since 1972.
After the insurance industry was liberalised in 2001, GIC Re was designated 'national reinsurer' and has the advantage of the first right to refusal and obligatory cession.
There are also 13 foreign reinsurance branches, set up by global reinsurance companies, including Munich Re, Swiss Re, and Lloyd's, operating in India.
MAKING A STAND
USTR's claims
- Indian state-owned insurance companies are not subject to the same law and 'prudential supervision
- The Indian government maintains an explicit sovereign guarantee on every LIC policy
- This prompts customers to buy LIC policies, leading to unfair advantage
LIC responds
- Never invoked the sovereign guarantee for its policies, nor used it as a marketing tool
- Leadership is entirely due to the trust of its policyholders and its financial strength and transparency
- USTR's views are based on an incomplete understanding of Indian insurance regulation and LIC's functioning
Feature Presentation: Ashish Narsale/Rediff.com
© 2025