LIC dismisses USTR allegations of unfair edge due to Sovereign Guarantee
“Many customers choose to buy LIC policies over those offered by private insurers, giving LIC an unfair competitive advantage,” the 2025 National Trade Estimate (NTE) Report published by the USTR
Mumbai: Public sector behemoth Life Insurance Corporation of India (LIC) on friday refuted the allegations made by the United States Trade Representative (USTR) that it enjoys an unfair competitive edge in India’s insurance market due to sovereign guarantee on its policies, asserting that it has never invoked the guarantee nor used it as a marketing tool.
“We firmly believe the USTR's views are based on an incomplete understanding of Indian insurance regulation and LIC's functioning,” the insurer said in a statement.
The country’s largest life insurer said that for the past 25 years it has operated in a fully competitive environment alongside 24 private life insurance companies and is subject to the same regulations by the Insurance Regulatory and Development Authority of India (IRDAI) and the Securities and Exchange Board of India (SEBI).
Ahead of the Donald Trump administration's reciprocal tariff move on Wednesday, the USTR in a report had said that India maintains ‘high’ import duties on a wide range of American goods such as agricultural items, drug formulations, and alcoholic beverages, besides imposing non-tariff barriers.
The report also said that LIC gets favourable treatment from the government, making foreign insurance companies uncompetitive in the Indian market. The report claimed that LIC’s policies benefit from an
explicit sovereign guarantee and this tilts the playing field in its favor. The report questioned the parity in prudential supervision between public and private insurers.
“Many customers choose to buy LIC policies over those offered by private insurers, giving LIC an unfair competitive advantage,” the 2025 National Trade Estimate (NTE) Report published by the USTR said.
LIC clarified that the sovereign guarantee, introduced in 1956 at the time of LIC’s nationalisation, was meant to instill public confidence but has never been called upon. “It is a statutory provision, not a source of competitive advantage.”
“We urge for a more balanced and factual appreciation of LIC’s role and contribution to financial inclusion and policyholder protection in India,” the insurer said.
LIC services over 30 crore policyholders and maintains a vast agent network of over 1.4 million, nearly matching the combined strength of agents at all 24 private insurers, which total 1.61 million. LIC attributes its market share largely to this extensive distribution strength.
The USTR report also raised concerns over India’s reinsurance framework, stating that domestic reinsurers enjoy mandatory preferential treatment that limits competition. Specifically, it flagged the “right of first refusal” given to Indian reinsurer (GIC Re), arguing this undermines global risk diversification norms. Alongside GIC Re, 13 foreign reinsurance branches, including global giants like Munich Re, Swiss Re, and Lloyd’s, operate in the country.
