Federation Secretary-General R. Jayaprakash, in a release here, claimed that the proposed move would help foreign companies to gain exclusive control over the savings of the people in the sector.
The move was aimed at appeasing the foreign insurance companies in the country, which were incurring huge losses, he alleged.
Jayaprakash said the "nefarious design" to withdraw the sovereign guarantee for all insurance policies of the public sector, on the pretext of offering a level playing ground, tantamounts to betrayal of the basic objective of the industry.
The Centre's move would also deprive the citizens of their only source of social security, he said.
The NFIFWI, the only representative body of 21,000 development officers of Life Insurance Corporation of India, organised a Parliament march on March 5 to protest the move to "destabilise" the Corporation and highlight the "oppressive measures" initiated by the LIC management against the development officers to phase them out from the industry, Jayprakash said.
Though a Memorandum of Understanding on service conditions was signed by NFIFWI and LIC in 1989, the management and the Centre were trying to alter the service conditions to pave way for private players, he alleged.
The NFIFWI also sought continuance of sovereign guarantee ensured for LIC policies, protecting the interest of the agents and conducting a comprehensive review of the post-privatisation era before taking any vital decisions, he added.