Selective Attacks on LIC Mirror 2010–2013 Campaigns That Hurt India’s Economy

Life Insurance Corporation of India is once again at the centre of a public debate. Questions have been raised about the soundness of its investments in large Indian corporate groups, particularly Adani and Reliance. Some sections are attempting to portray these investments as unsafe, creating a sense of alarm around the insurer's decisions. However, a closer examination suggests that this narrative is not only selective but also capable of disrupting confidence in one of India's most important financial institutions.

This kind of pressure is not new. Between 2010 and 2013, India witnessed a similar climate of uncertainty that affected the coal, energy, power and defence sectors. Projects were delayed, approvals were stalled and the lack of clarity resulted in policy paralysis. Public sector banks accumulated enormous non performing assets and companies such as Coal India, NTPC, ONGC, BHEL and HAL lost momentum, not because of weak fundamentals, but because decision makers hesitated under prolonged public scrutiny.

There is a growing concern that the same pattern is being repeated today, this time with LIC as the target.

LIC's central role in the Indian economy

LIC is not a typical company. It manages nearly fifty five lakh crore of the nation's savings and has a presence in almost every Indian household. Any attempt to weaken trust in LIC has a ripple effect on trust in Indian financial institutions in general.

What is striking is that the criticism is selective. Private insurers such as SBI Life, HDFC Life, ICICI Prudential and Kotak Life as well as several mutual funds hold similar or even larger exposures to the same corporate groups. Yet the focus remains almost entirely on LIC. This selective scrutiny creates unnecessary apprehension.

How LIC takes investment decisions

LIC follows a set of strict investment rules. It is not permitted to place more than one per cent of its total fund in any single corporate group. Every investment must pass through several checks including due diligence, compliance with IRDAI regulations, scrutiny by the board and review by proxy advisors. No politician or individual official can direct the insurer to invest in any particular company.

The insurer's money is distributed across more than three hundred of India's leading companies spanning all major sectors. This wide distribution has contributed to the remarkable growth of its equity portfolio which has increased from one and a half lakh crore in 2014 to about fifteen and a half lakh crore today. Most of the rest of the fund, around forty lakh crore, is invested in government securities and AAA rated corporate bonds from stable business groups.

Why the sudden attention on LIC

Much of the recent debate centres on LIC's investment in a few well known corporate groups. The figures, however, show a different picture. Since 2017 LIC has invested about thirty one thousand crore in Adani companies. The current value is around sixty five thousand crore. That represents a gain. LIC also invested approximately five thousand crore in AAA rated bonds of the same group which is only a small fraction of its overall assets.

What has received little attention is the fact that global financial institutions have made similar or larger investments. United States based insurers such as MetLife and Athene Life invested the equivalent of six thousand seven hundred crore. Japanese banks including MUFG and Mizuho have continued to lend to the group. European institutions such as DZ Bank, BNP Paribas, Barclays and Standard Chartered as well as the global fund manager BlackRock have also invested in recent months.

These institutions were not questioned for their decisions. Only LIC faced the scrutiny. This selective criticism risks creating hesitation among decision makers which could take India back to the environment of uncertainty seen a decade earlier.

Why insurers favour large infrastructure companies

Insurance is a long term business. Policies sold today may need to be honoured twenty, thirty or forty years later. For this reason insurers prefer investments that offer predictable and steady income over long periods.

Infrastructure assets provide exactly that. Airports, ports, power transmission lines, renewable energy plants, logistics networks and similar projects generate reliable returns year after year. Many of these assets in India carry AAA or AA plus ratings from credit agencies.

This is a standard practice followed by insurers across the world. A clear example is Berkshire Hathaway, which earns a significant share of its profits from infrastructure including electricity distribution companies, railways, natural gas networks and renewable energy facilities across the United States, the United Kingdom and Canada. These are sectors that mirror the operations of India's largest infrastructure groups.

What happens if insurers avoid infrastructure

There is another side to the debate that is rarely discussed. Many private insurers in India have a heavier exposure to the information technology and banking sectors. These sectors can be affected by global policies, technological disruption or geopolitical developments. For instance, the new visa fee structure in the United States created immediate concerns for Indian technology companies. With rapid advancements in artificial intelligence, the long term stability of some technology services is uncertain.

If a natural disaster, pandemic or major economic event were to occur in the future, insurers that depend heavily on volatile sectors may find it difficult to meet claims. Infrastructure, in contrast, remains comparatively stable. Encouraging LIC to reduce its exposure in stable assets could unintentionally increase risk within the broader financial system.

LIC's record of protecting policyholders

Since its establishment in 1956 LIC has remained a reliable institution that has never failed its policyholders. Even in earlier periods when some investments in troubled companies underperformed, LIC continued to honour all commitments. In the last ten years LIC has avoided such exposures and has maintained a disciplined approach. This is a major reason why its equity portfolio has expanded tenfold.