Chennai: At a time when private life insurers are accumulating all the energies they can to woo the urban populace towards their products, AMP Sanmar Life Assurance Company is playing a different stroke - by focusing on the non-metro and small-town market. Nearly 60 per cent of its business comes from these centres.

Says AMP Sanmar Life Assurance Company chief executive officer SV Mony: ''The promotional spend is high when one sells in metro markets, but the per-policy size and premium will be high. However, in non-metro and rural markets the ad spend is low, and so is policy value and premium income.''

Similarly, the company is not enthused about teaming up with banks to excel in a competitive market. ''Tying up with banks makes good front page news. But what would be interesting to watch is the outcome of the marketing alliances signed by all these players - life or non- life,'' he adds.

According to Mony, whether the existing distribution network (the individual agent-centred) will succeed or the new paradigm of brokers, banks and a host of others getting into marketing will do better is a question that will be answered in a year's time. However, the company has tied up with a cooperative bank in Kerala and with the Shriram group in Chennai for selling its policies.

But on the products front AMP Sanmar follows most others in the business - the company too has endowment, money-back and child-protection policies. And now AMP Sanmar has launched its pension plan, Bhagya Shree.

The former chairman of General Insurance Corporation of India (GIC) talks in detail with domain-b about his company and the issues affecting the life and non-life insurance industry. Excerpts:

It's nearly one year since AMP Sanmar started its operations. How is the performance?
It is satisfactory. We will close this fiscal with a premium income of Rs 11 crore from 27,000 policies. On the claims front, we have settled three in a smooth fashion.

Insurers are major investors. What is your investment income? Did your business plan suffer due to the slide in interest rates?
Firstly, the going down of the interest rates has not affected us in any manner, as we didn't factor that in our business plans. For the current year, the income from investment will be around Rs 10 crore.

Is it not on the lower side given the investible fund is around Rs 100 crore and AMP would like to have 17 per cent returns?
We are happy with the returns. AMP's expectation is on the return on its investments.

Can you tell us about your network?
We have 48 offices in South India and nine in the Western region. We have 60 field managers, six supervisory managers and 1,500 agents. By the end of this year we will have 2,500 agents. The total staff strength is 150.

The process of allowing private insurers took nearly 10 years. And now the Law Commission is reviewing insurance laws to formulate a single comprehensive legislation. Did the government look at insurance laws in a holistic manner before opening up the sector?
The Insurance Act is quite ancient. But its structure has been retained to expedite the sector's opening up. Now that private players are there and it is more than two years since they started transacting business, the time is ripe to take a re-look at the insurance laws. Given the constraints, the Insurance Regulatory and Development Authority (IRDA) did its best to usher in competition in the insurance sector.

In your opinion what are the unresolved issues in the insurance sector - life and non-life?
Pension reforms is the single-largest unresolved issue for the life insurance sector, while it is tariffs for general insurers. The roadmap for reforms has to be laid down. Regulations have to be drafted as to the entities that would be involved in three phases - collection, investment and payouts. This will be the single-largest activity that would change the face of the domestic financial services sector.

Now that the government has announced the setting up of a separate regulatory body for pension sector…
This will put the clock back by at least six months, as the new person will take at least six months to study and understand the complexities of pension reforms.

You mentioned allowing companies to fix premium rates instead of following the rates fixed by the Tariff Advisory Committee. Will this result in a price war and, in turn, pose a risk to policyholders?
There won't be any price war as the premium rates are to filed with the regulator who will check its economic viability in relation to the insurer. The regulator also monitors expenses. Tariffs have virtually killed underwriting skills. But the abolition of tariffs should be done in a phased manner.

Private life insurance companies want the central government's guarantee to LIC policyholders scrapped…
Per se the owner's guaranteeing liabilities are not an issue. But when the same is leveraged at the operational level then it creates problems. The real safety or comfort for policyholders is the insurer's solvency margin. And this is being adhered to by infusion of additional equity at regular intervals by the private sector.