Cambodia’s Fledging Insurance Market

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Cambodians are relatively new to insurance, with a market still in the infant stages of development, that, nonetheless, has experienced impressive growth in the last few years. According to some of the experts interviewed for the latest issue of the B2B handbook, as of now, the non-life insurance market is growing in excess of 22%. This might seem like a lot, but the numbers pale when we take a more holistic view: the total non-life market income in 2015 will only be around $60 million. The Vietnamese market, in comparison, accounted for $1.4 billion during the same period of time.

Presently, Cambodia is home to a range of quality insurers catering to a wide variety of personal and business needs. Fire, motor and health insurance are currently the three largest non-life market segments.

We sat down with the professionals that hold the reins for two of the country’s biggest and oldest players in the insurance market.

Insurance and the local culture

“The Cambodian market is still in its early stages of development,” asserts Michael Girling, the CEO of Infinity General Insurance. Girling tells us that most of his customers are expats, foreign enterprises, NGO’s and large corporate entities: “penetration into the Cambodian population, both for personal and commercial lines, is minimal.”

In the way of reasons for the slow uptake, Girling hints at speculations that it could be a cultural issue. Cambodian’s are mainly Theravada Buddhists who historically consider insurance as an invitation for bad karma by believing that something bad could happen. However, the insurance professional believes it is far likelier that the slow start is due to a combination of factors, such as “an initial lack of demand, a lack of knowledge, and limited purchasing power” among the local population.

Michael Girling, Infinity General Insurance

But things are taking a turn for the better, and, as David Treal explains, “the understanding of the benefits of being insured start to get in the mind of the public, and we see more and more Cambodian nationals sensitive to getting protection.” Treal is the head of AG Cambodia, a company he created in Phnom Penh a decade ago to serve the expat community with tailor-made insurance solutions.

The enhancement of the local sensitivity mentioned by Treal did not occur by chance. Rather, it was the result of an assertive push to educate the population on the benefits of becoming insured. Back to Girling, the Sydney-educated insurance expert gives as a peek into how it happened, explaining that the Insurance Association of Cambodia (IAC), supported by the Ministry of Economy and Finance, conducted – and still does – regional seminars in key population areas. To follow up the initiative, the IAC recently established an education committee that aims at promoting the image of the industry.

New opportunities: construction craze and brokers

The boom in construction – seen across the country, but most deeply felt in Phnom Penh – has had a profound effect in the non-life insurance market, multiplying opportunities for insurers to push forward their products, such as building and fire insurance. “The construction boom is definitely in full swing and a major contributing factor to the growth in the size of the non-life insurance market,” says Girling. Opportunities can turn particularly lucrative with the larger developments, with demand for contract risk insurance and fire insurance on the rise. As noted by Girling, pricing for the larger risks is not controlled by tariffs, which engenders a “great deal of competition” to insure these projects, and creates opportunities for local insurers to get involved.

David Treal, AG Cambodia

The brokerage sector is also teeming with opportunity. Brokers are a new entity in the marketplace, effectively acting as the bridge between the commercial clients and the insurers – mainly non-life. “Lately, we have seen new firms getting a license and entering the [brokerage] market,” explains Treal, “it is the natural way of development: to have a shift from direct distribution to brokered and agent distribution.” Treal goes on to explain that brokers usually offer their customer “the most competitive rate” with tailor-made benefits.

Girling, a bit less upbeat about the brokerage sector, acknowledges the two sides of the coin: “[the brokerage market] is an important development which can be both good and bad; good in that it allows business to be written at a lower margin, bad from the perspective that the relationship shifts to the intermediary.”

Challenges and pitfalls of a fledging market

We shift the conversation from new opportunities and new horizons that stimulate the sector, to the challenges and pitfalls that hamper it. Treal places the emphasis on the strenuously long process of “building confidence” with the customers, a challenge that often deters investors from entering the insurance market. The French entrepreneur alludes as well to the strong legal constraints that permeate the system, which require industry players to follow closely Ministry’s rules and recommendations. To conclude, Treal refers to the unappealing size of the marker: “the market is rather small, making the sector quite unattractive to most investors.”

For Girling, the market’s biggest existential threat is the shortage of skilled and experienced insurance professionals. As more players come into the market – whether they are life, non-life or brokers – the “dilution of skills” throughout the market becomes more blatant, as there are insufficient locally trained insurance professionals to meet the demand. Infinity is endeavoring to overcome this challenge by promoting training with the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), and partnering up with local universities to offer internship programs.