Charles Cheo, managing director of Forte Insurance, is sanguine on the growth prospects of Cambodia’s US$30 million general insurance market, even though there are five other general insurers competing against Forte, and three new life insurers entering the market.
Forte established a presence in Cambodia in 1998 as one of the first insurance companies and presently has a 34 per cent market share of gross premiums written and a 49 per cent market share of net premiums written, positioning the company as the market leader.
While the general insurance market in Cambodia grew 22 per cent from 2010 to 2011, and is expected to grow 25-30 per cent in 2012, the market remains comparatively small with only a 3-4 per cent penetration rate.
The main reason for the sluggish market development is the absence of consumer participation. Companies have a vested interest in insuring their assets.
In Cambodia, over 80 per cent of the market is corporate, consumers comprising less than 20 per cent. The commercial sector typically leads market development in emerging markets. The challenge in Cambodia is to stimulate consumers to embrace insurance and Cheo has plans to do just that.
Cambodia’s general insurers have traditionally offered a set of stagnant products that have evolved at a slow pace.
Terence Anderson, a newly recruited director at Forte, is keen to broaden the product range, innovate existing products, and modernize the company’s distribution channels.
With the arrival of the stock market, Anderson believes the demand for indemnity insurance will increase as directors and officers seek insurance protection to shield against personal liability for actions of the corporation they serve.
As companies list, an IPO insurance market will be essential to protect directors from the potential liability of errors and omissions in the prospectus. Investors will also require companies to have key-man insurance coverage to compensate for financial losses that would arise from the death or extended incapacity of a vital person in the company.
Consumer growth in 2011 was driven by motor, fire, and health insurance and Andersen sees improvement in the healthcare insurance product offerings as an opportunity as there is an emerging desire for coverage beyond Cambodia’s borders and for higher limits to cover more serious and prolonged illnesses.
He also reckons employers will need to sweeten compensation packages in order to keep and retain employees, and benefits such as Group Personal Accident insurance are both affordable and appealing.
Forte intends to broaden its distribution network by going beyond the traditional model of selling through employees and agents. Forging alliances and partnerships that create enhanced product value for both parties and greater access to the market are areas of most interest.
“It’s all about distribution” remarks Cheo and Forte will deepen their distribution channels with partners who have “common interests”.
Cheo is very optimistic that the three new life companies will compliment his business rather than adversely impact it. The life business requires significant investment to both educate the prospective buyers and for building a distribution infrastructure to access a consumer market.
If the business model is replicated in Cambodia, an army of agents will be unleashed to market life products. The weak consumer market for general insurance should get an uplift as a result as consumers will gain an awareness to not only protect their lives, but to also protect their property.
Cheo does not believe the market is presently overcrowded. “If you are doing business the same way you did it last year, it is crowded. It isn’t crowded if you are looking for new opportunities and to change the way you do things” Cheo says.
With only a 3 per cent take-up rate, it’s clear something dramatic needs to be done to stimulate buying behavior for insurance products most of the world sees as essential. Only time will tell if Forte has the right strategy to be the catalyst .
Anthony Galliano is the chief executive of Cambodian Investment Management. firstname.lastname@example.org