Chennai: AMP Sanmar Assurance Company (ASAL also means original in Tamil) has become the latest entity to enter the life insurance market with three traditional products money-back, endowment and child-protection policies.

The Rs 125-crore equity-based company, a 74:26 joint venture between the Chennai-based Sanmar group and AMP, Australia, will initially focus on southern Indian markets. Later it plans to expand to other regions.

Explaining the rationale behind the life insurance foray by the group, a major in chemicals and speciality chemicals, ASAL chairman N Sankar says: "According to the Harvard professor Kirhsna Palepu, if you are fortunate to be in a single business that can be deep, then you should be in a single business, but should grow large quickly. But markets in India are generally thin, hence the need to spread yourself to grow to the minimum size necessitated by the current open economy."

Palepus theory, Sankar says, is that many Indian companies do not have a core competency in the sense that the terms would be originally coined, but have competencies in identifying new businesses and organising and launching them well. "And once launched, a new business should be given financial and managerial autonomy to grow and thrive independently."

For AMP, managing around $150-billion worth of assets, the Indian presence is part of its Asian strategy. Only recently did the company enter the Japanese market, and now it is looking at China seriously.

Detailing the companys plans, ASAL CEO S V Mony says: "The organisation structure is flat. Business will be done through customer service centres headed by our customer service executives. By the end of this month we will have 10 such centres in southern cities like Chennai, Vellore, Coimbatore (Tamil Nadu), Kochi and Kottayam (Kerala), Bangalore and Hyderabad."

By March-end, the company believes it will have a presence in 25 cities with an agency force of 1,500. Moni says ASAL has 120 advisors, and this number is expected to go up by 260 soon. "Traditionally the Indian market is agent-driven. With the opening up of the market, new distribution channels like corporate agents and marketing alliances are being negotiated. These new channels will contribute 25 per cent or more of the total sales."

Responding to a query as to why did AMP, with its expertise in wealth management and pension products, start its Indian operations, selling traditional products, AMP International MD Tim Wade () says: "We will start with products that are known to the market best, and later we will sell other products like pensions."

Says Mony: "Our special endowment policy is more than a normal endowment policy. Two more products are awaiting Insurance Regulatory and Development Authority approvals. By the end of this month, our basket will have five products. The other products on the anvil are group-, term- and single-premium policies. Like other new players ASAL offers 15 days free-look period for policyholders.

ASAL has an ambitious plan to sell 30,000 policies during the first year of its operations. "In value terms, the first premium income will be Rs 26 crore," says Mony. "We hope to break even in six years and policyholders can expect policy bonus on the third year."

Mony is not in favour of bonus out of shareholders funds. "I hold contrary views on founders or other kinds of bonuses declared not out of genuine surplus."