The expansion of Cambodia’s nascent insurance industry is surpassing everyone’s expectations. The growing demand for all kinds of insurance policies, a byproduct of the country’s rising living standards and a more insurance-friendly population, has put the industry on the path of fast and sustained growth. However, the industry also faces its share of challenges.
Huy Vatharo is the chairman of the Insurance Association of Cambodia, a body that groups together all the licensed non-life and life insurers operating in the country, acting as a single voice for the industry in Cambodia, fostering public awareness and promoting professional standards. Vatharo discusses with B2B the state of affairs within the sector, the most pressing challenges and the opportunities that lay ahead.
B2B: What takes the lion’s share in your industry?
Vatharo: Given the fact that life insurance and microinsurance are just 3 years old, the insurance market in Cambodia is dominated by the non-life insurance industry.
Cambodia’s general insurance industry earned a total premium of $61.6 million in 2015, an increase of 16.4 percent year-on-year. Property insurance accounted for 39.7 percent of that premium. Motor insurance came second with 15.1 percent. Then we have health insurance with 14.1 percent, personal accident insurance with 6.8 percent, engineering insurance with 5.8 percent, marine, aviation and transit (MAT) with 4 percent, and, finally, “miscellaneous” with 14.5 percent.
On the life side, the total gross premium earned in 2015 reached $22.1 million, almost three times more than last year. Most of the life insurance premium came from endowment products, which consists of both protection and saving components.
B2B: Could you share some of the more pressing challenges and opportunities the industry faces?
Vatharo: Cambodia is one of the few countries in the region (or even the world) that achieved a robust economic growth averaging over 7 percent in the past decade. This has led to a notable increase in GDP per capita. Taking into consideration the fast-growing economy, the burgeoning income per capita and private investment, and a shift in people’s attitude towards insurance (who are now both more concerned about the risks of not being covered and more aware of the need for insurance), we can see how the insurance market in Cambodia has significant potential for growth.
In the last five year the insurance market has become more active, with an increasing number of players, both domestically and internationally, coming into the market. Currently, the insurance industry in Cambodia consists of seven non-life insurers, four life insurers, six micro-insurers, one reinsurer, seven insurance brokers, and 11 insurance agents.
However, insurance penetration (the ratio of premium underwritten in a given year to GDP) was estimated to be just 0.45 percent in 2015, which is very low in comparison with other countries in the region (average insurance penetration in the region was 3.4 percent in 2014). In the last five years, non-life insurance has grown, on average, at an annual rate of 20 percent.
However, the industry is still facing challenges. First, local staff at insurance companies often lack the necessary professional skills, particularly in the areas of product development, underwriting, loss assessment, and actuarial expertise. The insurers need to focus more heavily on the professional development of their employees. Second, despite the significant growth in the industry seen thus far, insurance products among the population are still relatively unpopular. Stakeholders need to do more to educate the public about the potential risks they are facing in their daily lives and the benefits of being insured against those risks. Third, the use of insurance intermediaries is also low, which inhibits broader access to insurance. Fourth, unlike many other countries, the insurance companies have limited investment tools available in Cambodia. The insurance companies face a lack of choices, and rely mainly on fixed deposits at commercial banks.
Last but not least, with the new insurance law enacted last year, and the fast growth of the market, the regulatory body has been working on a set of regulatory changes to reflect the current situation and trends of the market. Insurance intermediaries, prudential measures on solvency, and the industry’s code of conduct, to mention a few, are some of the topics addressed by these new regulations.
B2B: How has the Cambodian understanding, acceptance and subscription of available services changed over the years?
Vatharo: The urbanization of the country is happening at breakneck velocity. Per capita income has increased significantly, and Cambodia has now joined the ranks of lower middle income countries. Lured by an expanding economy, more domestic and foreign businesses have set up shop in the Kingdom. People are more aware of the risks that they are exposed to, and of the need to protect themselves and their family, as well as their property and assets, against those potential risks. These are the factors helping to shape people’s attitudes towards buying insurance.
While the number of insurance policies taken out keeps increasing, it has also been observed that more and more people are covered by more than one insurance policy. This reflects a broader understanding among the population of the various potential risks out there.
B2B: How are stakeholders reaching out and trying to educate the public on the benefits of getting insured?
Vatharo: So far, the Ministry of Economy and Finance (MEF) has led efforts to raise public awareness on the benefits of insurance by conducting public seminars in major cities across the country. Their “target” are individuals working in various sectors. In addition, the Insurance Association of Cambodia (IAC) has organized seminars for students at various universities and authored articles on insurance in printed media and online. While MEF and IAC have focused more on these general concepts, insurance companies, on the other hand, tend to provide education to their potential customers that revolves around their specific products.
Insurance is about helping people manage risk so that, if the unexpected happens, the loss is minimal and the person can quickly recover and get on with his life. People face different levels of risk; before starting to manage risks they need to identify them and assess whether or not buying insurance is necessary. However, many Cambodians do not pay attention to or understand this concept. They don’t have insurance. Unfortunately, by the time they realise the benefits of insurance, it’s sometimes already too late.
So, it is crucial for all stakeholders to put more emphasis on customer education and to raise public awareness and knowledge regarding insurance products and their benefits. There should be a long-term program to promote awareness and education of risks and insurance issues.