LIC on Friday issued a clarification denying any preferential treatment by the Indian government or regulators after the United States Trade Representative report's accusations regarding sovereign guarantee to LIC.
Currently, the Indian government maintains an explicit sovereign guarantee on every life insurance corporation policy, stated the USTR report. As a result, many customers choose to buy LIC policies over those offered by private insurers, giving LIC an unfair competitive advantage, it said.
LIC, in its clarification, stated it 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 that was designed to build public confidence in the early years of nationalisation, the insurance company said in its response. It has never been invoked or used as a marketing tool nor did it provide any undue advantage to LIC, it added. For the past 25 years, LIC has operated in a fully competitive market alongside 24 private life insurance companies. It is regulated by IRDAI and SEBI and receives no special treatment from the government or any regulatory authority, LIC said.
"We firmly believe the USTR's views are based on an incomplete understanding of Indian insurance regulation and LIC's functioning," it stated. "We urge for a more balanced and factual appreciation of LIC's role and contribution to financial inclusion and policyholder protection in India."
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