It Is High Time For Cambodia’s Insurance Market

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We take a closer look at the insurance market in Cambodia which, according to industry experts, is thriving right now, driven by a rapidly increasing middle class and robust economic growth.

Cambodia’s fledgling insurance sector has plenty to celebrate. In 2016 alone, the total gross premium of life insurance in Cambodia grew by 95 percent year-on-year, totalling over $43 million.

Meanwhile, more modest growth figures of 14 percent compared to 2015 were accomplished in the non-life market (also known as general insurance), according to the Insurance Association of Cambodia (IAC).

“The market is thriving,” says Jeffrey Whittaker, the CEO of People & Partners Insurance, the latest firm to join the roster of companies dispensing non-life insurance products. “The country is no longer a backwater. Combining life and general, gross premium has already surpassed the $100 million benchmark.”

Driven by an expanding middle class and the remarkable economic performance of the country – with a robust GDP growth of 7.20 percent last year – this segment of the economy is poised to continue to prosper. According to a recent report by industry mammoth Swiss Re, the insurance markets of the CLMV economies (Cambodia, Laos, Myanmar, and Vietnam) have all benefited from more stable domestic socio-political environments and further integration into the global economy.

The challenges

Despite the promising growth figures that surround the sector, the total insurance penetration rate (life and general combined) was a disappointing 0.35 percent in 2015 according to Swiss Re’s numbers, lower than Vietnam’s (1.56 percent) and even Laos (0.45 percent).

“This means that we still have a lot of space to grow the business and to help protect the financial future of Cambodian families,” argues Robert Elliott, CEO and general manager of Manulife Cambodia, a firm that penetrated the market in 2012 as the first international player in the life industry.

After all, the industry is still very young, asserts IAC Chairman Huy Vatharo: life and microinsurance firms have only been around for the last five years, while the appearance of the first non-life insurer can be traced back to the early 2000s.

The skills gap

For David Treal, director of AG Cambodia, a significant hurdle the sector faces is a dearth of qualified professionals. “The big challenge in the industry is to hire skilled workforce, which is prompting insurers to set up their own training centres,” the French insurance expert says.

People & Partners’ Whittaker is of the same mind. “Recruiting is a nightmare. There is a critical shortage of insurance-experienced staff,” he claims.

To tackle the issue, companies are compelled to develop solid in-house training programs. People & Partners holds weekly training sessions to form competitive insurance agents. “Our training program is very important for us. We take the best graduates from universities and train them intensely,” says Whittaker.

Manulife, as a case in point, launched in 2014 its Academy of Excellence, an institution devoted to the formation of insurance advisors and the first centre for HR development the industry can boast. The centre aims to provide Cambodians with knowledge of international standards of life insurance while providing the tools to conduct long-term financial planning.

According to Whittaker, the industry regulator has their own plan to increase the level of professionalism in the market. The Insurance and Pension Division of The General Department of Financial Industry, a division of the Ministry of Economy and Finance, will soon require compulsory training for insurance agents. Under the new scheme, candidates will be obliged to undertake 30 to 40 hours of training before they sit an exam administered by the regulator and become legitimate agents. Firms will need to do the bulk of the training, around 30 hours, while the IAC will take care of the rest.

Compliance issues

As the sector develops, insurance companies can be sure of one thing: they will be operating in a much stricter environment. Only last year, eight new prakas were drafted aimed at regulating the insurance sector, notes Whittaker. “They are trying to get us into best ASEAN practices, which leaves for a tighter control of the market,” he said.

Beginning in January 2019, for example, industry players will be required to adhere to the International Financial Reporting Standards (IFRS). Whittaker believes the task of becoming compliant with IFRS standards is not an easy one, and may prove troublesome for the industry.  “These are very stringent financial reporting standards, and it won’t be easy,” he added.

Where the opportunities are

With the real estate boom in full swing – the value of investment in the sector more than doubled from $3.3 billion in 2015 to $8.5 billion in 2016 – industry insiders believe property insurance is one of the most attractive segments in the non-life sector. Already property and fire insurance takes the lion’s share in the general market, accounting for 37 percent of the total premium, followed by medical (16 percent), and automobile (15 percent). “Construction is booming, and there are great opportunities to be had in this sector,” says Whittaker.

Medical insurance shouldn’t be overlooked either, with more and more companies giving employees medical coverage. Despite the expansion of the National Security Social Fund last year, sales of health insurance plans continue to expand, with medical policies achieving a gross premium of over $11 million in 2016.

Finally, there are a host of new issues that insurance companies will need to address in the near future. “New covers that we will need to look at include cybercrime, political violence, terrorism, the big data issue, artificial intelligence and driverless cars. These are all future issues that we have to rise to,” concludes Whittaker.