Although the insurance market in Cambodia remains relatively immature compared to neighbouring countries such as Thailand or Vietnam, it has come a long way in the last few years. As it has grown and gained complexity, transitioning from an industry worth $21 million in 2009 to one valued nearly three times as much in 2015, new players have made an appearance, responding to new needs and voids in the market. Brokers are one such category of these newcomers.
A few years back, there were no professional intermediaries in the market, and all insurer-customer interaction was direct. Now, however, the distribution channel has changed. “With an industry becoming more and more complex, skillful and professional brokers are needed to assist in getting their clients the best terms,” says Chea Samnang, Managing Director at Insurance Broker Solutions Cambodia (IBS).
The Cambodian insurance brokerage business is worth more than $44 million, according to John George, International Chairman for MGA Asia, who announced the figure during an interview with The Phnom Penh Post in 2014. According to him, the figure will double in the next three to four years. There are currently seven insurance brokers operating in the Kingdom.
The Cambodian insurance brokerage market
MGA Australia, one of Australia’s biggest brokerage firms, established a subsidiary in Cambodia in August 2014, MGA Asia, to meet the Kingdom’s expanding insurance needs. Its Executive Chairman, Meas Sophat, says that the company chose Cambodia to establish its first branch in Southeast Asia because the country “is one of the few emerging markets that is open to insurance brokers”.
Cambodia’s openness to brokers reflects changing dynamics in the insurance market. According to Sophat, an increasing number of brokers are becoming certified — obtaining their license from the regulator, the Ministry of Economy and Finance — lessening the need for direct interaction between insurer and customer. Sophat believes the transition to an intermediary-based system is only natural, as the industry needs professional brokers to instil trust in the consumer and increase awareness of the importance of insurance. In this regard, IBS’s Samnang stresses that brokers “play an important role in maintaining the sustainability and growth of the market”.
Middlemen and advisors
Brokers serve a variety of roles. They advise customers on which product to purchase and how much it should cost. As middlemen, they negotiate with the insurer to secure good contract arrangements and a competitive price for the client. They are also an integral part of the claims process, negotiating with the insurance company to provide adequate compensation to the clients.
“We work for the clients,” stresses MGA’s Sophat, “we protect their interests through our professional advice and expertise.” Following this line of thought, Samnang outlines several benefits to using the services of a brokerage firm.
“Through us, the client gains access to a wider range of products, and can make informed decisions after considering the premium prices and coverage of the leading insurance firms, which we make available to them. Clients will also get professional advice to help them choose the best product for their particular needs,” he also says. “They also benefit from our negotiation skills and bargaining power as we initiate negotiations with the insurer to secure the best deal. Finally, customers benefit from the advanced technology we employ for tracking claims.”
Generally, these services come free of charge to the client, as most brokers choose to charge their fee only to the insurer; in other words, the broker’s fee is included in the premium. “We deduct our fees when we arrange the payment to the insurance company. There’s an advanced system in place to manage these transactions,” notes Sophat.
Brokers and insurers: strategic partners
Insurance companies welcome the presence of brokers in the market, and are happy to work with them. “We are strategic partners,” says Samnang. “Our role is to make sure everyone’s interest is looked after.”
David Treal, Director of AG Cambodia, an insurance agency operating in the Kingdom since 2006, agrees with the Cambodian broker: “Brokerage firms handle the business development [of insurance companies]. They also ease the insurers’ human resources by managing client relations, and provide support in assessing the risk.”
As shown by Treal, brokers and insurers, enjoy a mutually beneficial relationship. The work of brokers allows insurance companies to cut expenses on sales staff. This makes it possible for the insurers to allocate a greater percentage of their resources to distribution, which, ultimately, benefits their bottom line.
Sectors of opportunity
Our contributors have noted a handful of sectors that present particular opportunities for insurance brokers in the Kingdom. Samnang and Sophat both agree that the construction and property sectors lead the way thanks to the boom in construction and the appetite for development of condominiums and apartments that has taken over Phnom Penh. According to Samnang, an increasing number of construction insurance policies are being signed now. Eventually, when these construction developments are finished, we will expect to see an especially high number of property insurance policies being taken out.
With hundreds of manufacturers throughout the Kingdom currently under an insurance programme, and hundreds more with committed investments, the manufacturing industry takes second place as an area of interest for brokers, according to both Samnang and Sophat. Finally, Samnang points out that the rise in the number of hotels and restaurants throughout Cambodia comes with a heightened demand for fire insurance products, making the tourism industry another sector targeted by brokers.
Employees are the most valuable assets in virtually any organisation. As such, employee benefit policies — such as group personal accident insurance, group hospitalisation and surgical insurance and medical evacuation plans — are the products customers are demanding the most, acknowledges Samnang. Taking second place are property insurance policies, like fire and perils insurance. Motor vehicle insurance comes third, reflecting the high risk associated with travelling by road in the Kingdom and the fact that, in Cambodia, having a third party liability insurance is compulsory.
With an insurance industry growing in excess of 20 percent a year — according to the Insurance Association of Cambodia —, the outlook for the nascent insurance brokerage market remains highly positive. Moreover, the recent entry in the local scene of MGA Asia, a brokerage firm consequential at a global scale, suggests that the market is becoming increasingly attractive in the eyes of international investors.