The instances of a single Instanced Static Mesh Component can only have 1 mesh and 1 material. What you’re doing will not work. Whenever you assign a material, you do not really assign it to an instance - you assign it to all instances of this one component.
You have some options:
- you could have 2 ISMc:
The material can be pre-set on the component in the details panel.
- instead of ISMc, you could use as many regular Static Mesh Components as there are lights:
- there is also a more involved technique - Custom Primitive Data
This would actually allow you to achieve what you want. 1 ISM, 1 material, as many colours as you need.