Although Cambodia’s insurance sector is still in a nascent stage, her people are starting to open up to accept policies as protection for the future
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International Monetary Fund (IMF) puts the insurance sector’s contribution to Cambodia’s financial assets of $42 billion at 0.5 percent and 0.8 percent to gross domestic product (GDP) of $24.5 billion last year. The life insurance segment, which penetrated the market in 2012, contributed a negligible 0.3 percent to GDP last year.
Although the Kingdom’s insurance sector remains small relative to the size of the financial system and gross domestic product (GDP), positive growth continues this year on the back of operation and customer scale, particularly through bancassurance partnerships.
The high growth potential in a fairly young economy with 16 million population has seen an influx in insurance firms. According to Insurance Association of Cambodia (IAC), 63 insurance companies and insurance-related firms set up shop in Cambodia. Of that, 13 are general insurers, nine life insurers, one re-insurer, nine microinsurers, and 33 intermediary companies. Joining the ranks are Japanese insurers, Dai-ichi Life Insurance (Cambodia) Plc, and Newa Insurance Cambodia Plc.
Economic stability, higher purchasing power
Huy Vatharo, chairman of Insurance Association of Cambodia (IAC), says the growth in company’s interest stems from growing middle income class, economic stability, foreign direct investment, rising purchasing power, and awareness among Cambodians and business community.
Last year, the total gross premium collected by insurance companies went up 30 percent to $196.4 million from $142 million in 2017, and $113 million in 2016.
General insurance rose 15 percent to $87 million in 2018 compared to $75.4 million in 2017, driven by property, medical and auto insurance. The compound annual growth rate (CAGR) for general insurance between 2013 and 2018 came in at 15.7 percent.
Life insurance premium hit $100 million last year, expanding 50.6 percent from $67.5 million in 2017 because of endowment policies. The segment of insurance has seen exceptional growth, evidenced by 120.55 percent CAGR from 2013 to 2018.
The microinsurance segment experienced a marginal dip at $9.3 million in 2018 versus $9.6 in 2017.
“Insurance is a financial safety net for people, investors, and the business community,” says Vatharo.
Manulife (Cambodia) Plc, which is among the first foreign insurance firms that established in Cambodia, serves some 90,000 people, making up a total sum assured of over $2 billion.
Manulife chief executive officer and general manager Robert Elliott tells Capital Cambodia that Cambodians were first introduced to the concept of life insurance when his company started working closely with the Economy and Finance Ministry to educate the market about protection and improving their financial future.
“In Cambodia, we’ve offered customers a wide range of solutions that allow them to save for long-term financial goals. This includes savings for retirement, children’s education, and protecting the family’s financial future from unfortunate incidents,” Elliott says.
He finds that the expanding middle income class segment in Cambodia has created a good environment for the life insurance sector to prosper.
“Based on the journey we’ve been through, we are positive about the future of this industry. The growth of life insurance companies contributes to increased understanding over the importance of life insurance and its protection,” says Elliott.
The increased understanding has led to rising policyholders, says IAC, showing that some 134,000 general insurance policies were taken up in 2018 alone, up 37 percent from 97,808 a year ago.
Life insurance policies grew to 417,583 contract last year from 159,492 in 2017. However, the take up rate for microinsurance slipped to 2.2 million in 2018 from 2.5 million policies in 2017.
Forte Insurance (Cambodia) Plc, which possesses a 46 percent market share in general insurance, posted a 15 percent year-on-year growth at $42 million last year, says managing director Youk Chamroeunrith.
“Last year, we collected a total premium of $196 million,” he says, contending it is tiny as opposed to $5 billion collection in Thailand and $2 billion in Vietnam. “This just means there is more room for growth in the Cambodian insurance market. We foresee a 15 percent overall growth in insurance premium this year,” he adds.
Having said that, he notes that there is a default rate, though he declines to state the figure.
“It is not much. (Normally) policyholders have to pay the premium in 30 days. If they don’t pay after 30 days, we will cancel the policy,” he says, adding that defaults happen in every sector.
For instance, Chamroeunrith says, some clients or companies purchase the insurance for some obligatory reasons and cancel the policy after a short period. Then, there are policyholders who cancel the policy due to financial reasons.
While Forte paid out $20 million in total claims last year, IAC says Cambodian insurers disbursed $22.3 million in general insurance claims, up 22.5 percent from $18.2 million 2017. Life insurance claims totalled $2.3 million in 2018 from nearly $1 million in 2017. Most of the claims were related to fire, medical, accident, and automotive.
Life insurance to lead
Vatharo is optimistic that life insurance will take the lead in the market in future. “As the market grows, life insurance would expand because it focuses on personalised needs and the products that enable people to save money, and enjoy returns after the insured period expires.
“The growth of the middle class, and awareness towards insurance will likely boost the market in years to come,” he adds.