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Has AMP Sanmar’s exit from life
insurance left you worried?
If you are one of those individuals who has 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.
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