Articles

If you are one of those individuals who have bought a life insurance policy from a private insurer, the news of AMP Sanmar exiting the Indian life insurance industry may have left you worried to say the least. The company has decided to exit its operations here in India and reports state that Axa, Europe's second largest insurer is mulling over buying out AMP Sanmar.

So what went wrong with AMP Sanmar? What will be the fate of its policyholders? And what if, this is only the tip of the iceberg? Says Sandeep Batra, Chief Financial Officer, ICICI Pru Life Insurance Company, 'As happens in all sectors, companies sometimes revise their strategies and priorities, as has happened with AMP Sanmar. Such developments could possibly happen in the future too and should not be viewed with great alarm'.

AMP Sanmar is only in its fourth year of operations. On an average it takes around seven to eight years before an insurance company achieves break even. And till such time, the promoters need to pump in substantial amounts of capital to spread their network wide, recruit staff and invest in publicity. This is possible only for promoter companies with deep pockets.

AMP's British operations were not doing well and with businesses elsewhere too not bringing in significant gains the global major plans to restructure its business. It now plans to focus on asset management business in the Asian region and aims at having a presence in India albeit differently - through infrastructure funds and other investments.

So does this mean global players are free to enter and exit the insurance business whenever they like giving scant regard to the interests of policyholders? Not really. The insurance regulator's stringent regulations safeguard the interests of the policyholders. Adds Sandeep Batra, 'If the company is bought over by another, stronger player the policyholders can get even greater benefits'.

Insiders say that, in a few years from now consolidation will take place and only a few major insurance players will rule the Indian insurance market. Perhaps a company or two may exit in future. As markets become more mature and competition increases the lower end players will have a tough time garnering market share. For the promoters, it may not be easy to pump in funds when the returns do not match. After all they need to keep their shareholders happy too.