AMP sure of better results in India, Japan

Chennai: Even as the Japanese life insurance industry is experiencing turmoil — merger and acquisitions, contraction of business and investment income, weak equity markets — the new entrant, AMP Securities (the Japanese arm of AMP, Australia), is confident of marching ahead (See: 'Life is not easy for Japanese insurers: S&P').

“We have defined contribution pension as well as unit-linked products. While the Japanese life insurers got into problems due to guaranteed returns, AMP Securities does not offer any such guaranteed returns,“ says AMP Asia managing director Gavin Pearce.

AMP Securities, a three-way joint venture between AMP, NEC and Myroku Jyoho Service Company (MJS), started business in January 2002. Recently AMP also tied up with FP Planet, a financial planning company with 400 planners. “AMP owns 90 per cent of the equity in our Japanese venture,“ Pearce adds.

According to him, the Japanese financial market is more mature than China and India. “The level of customer awareness is high, and it is a wealthy market. But the customers are more loyal to domestic companies as compared to foreign players.“

It is this loyalty that AMP and its Japanese partners plan to switch in their favour. Aiding them is the problems faced by local insurers, resulting in major players registering lower growth in new businesses.

India is the other Asian market AMP has entered tying up with the Chennai-based Sanmar group. “I am pleased with the amount of life insurance business underwritten by AMP Sanmar Assurance Company here. The company has exceeded the targets,“ says Pearce.

AMP Sanmar Assurance has the largest branch network among all private insurers, and focuses on semi-urban and rural areas for business while the others are busy saturating the urban market.

The Life Insurance Corporation (LIC) gets substantial business from semi-urban and rural areas. Though the individual policy-size will be smaller in these areas, the volumes and stickiness will more than compensate for that. “It is too early to comment about the Indian market as LIC still commands a 99 per cent market share,“ Pearce says.

Comparing the Indian and Australian financial markets, he says the latter is in its infancy stage but can catch up fast. “The Indian financial market is characterised by unsophisticated customers, traditional products and distribution channel.“

He says the products are complex and are not tailor-made to meet individual needs. On the distribution side he says advisors and agents are paid commissions based on the business procured by them, whereas in developed countries customers are willing to pay for the financial planning advice given. “India should move from a system of high upfront commission to a combination of commission and fee for advisory services.“