In a rebuttal to the US Trade Representative’s (USTR) recent report, the Life Insurance Corporation of India (LIC) has dismissed the allegations imposed on it. The USTR in its report, titled ‘2025 National Trade Estimate Report on Foreign Trade Barriers’ alleged that LIC enjoys an unfair competitive advantage in India's insurance market.
The state-owned insurer, which has played a dominant role for around seven decades, said that its market leadership is built on trust, not preferential treatment.
What was in USTR’s Report?
The US trade body had flagged concerns over what it called an ‘unlevel playing field’ in India’s insurance sector. It pointed out that LIC benefits from a sovereign guarantee on all its policies, something private insurers do not have.
The report further suggested that this guarantee influences consumer choices, pushing the market in LIC’s favour.
The USTR said, “India maintains an unlevel playing field in the insurance market. State-owned companies are not subject to the same law and prudential supervision as private firms and enjoy various guarantees from the government. Currently, the Indian Government maintains an explicit sovereign guarantee on every life insurance corporation (LIC) policy. As a result, many customers choose to buy LIC policies over those offered by private insurers, giving LIC an unfair competitive advantage.”
India’s Foreign Direct Investment Policy over the years
India had passed the Insurance (Amendment) Bill in March 2021 which removed restrictions on foreign ownership and control of Indian insurance companies and increased the maximum foreign investment allowed from 49 per cent to 74 per cent.
Moreover, the country has further proposed to raise the FDI cap on the insurance sector from 74 per cent to 100 per cent.
“While this represents progress, it still is not clear if India will remove safeguards instituted in 2021. These safeguards require a majority of board members to be Indian residents and, if an insurer is incorporated or domiciled outside of India, to maintain a higher solvency requirement for foreign-invested insurers,” the USTR stated in its report.
LIC’s Response
In its response, LIC has strongly refuted the claims of USTR, asserting that it operated on equal footing with private insurers and is regulated just like any other insurance company under the Insurance Regulatory and Development Authority of India (Irdai) and the Securities and Exchange Board of India (Sebi).
“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,” the public life insurer stated.
It further stated, “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 customers across India with dedication and professionalism.”
The state-owned life insurance company objected to USTR’s views, pointing out that its 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 stated.
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