Cambodia Life Insurance Company Plc plans to bundle services with banks to offer guarantees on mortgages, company representatives said.
The service is hoped to make mortgages more accessible in a country where housing loans are still considered risky business. Collateral is usually required to take loans in Cambodia.
Cambodia Life customers would be able to back up mortgages with a Cambodia Life plan in the event that payments cannot be made, In Meatra, the company’s director general, said yesterday at a life insurance workshop in Phnom Penh.
The service would bundle life insurance payments and overdue mortgage payments into a single premium, and potentially lower the risk of default.
The insurance firm, Cambodia’s first to offer comprehensive life insurance coverage, was in discussion with 20 commercial banks on developing the product.
So Phonnary, executive vice president of Acleda Bank, confirmed that the bank was in talks with the insurer. The product could reduce the need for collateral on loans but could also increase costs to customers, she said.
“Our loans are still small and we always need collateral from customers if they borrow from us to buy a flat or house. But, we don’t require them to have insurance on that house. Right now, we have not made any link to [this product] because it can put more cost to borrowers,” she said.
However, So Phonnary said the bank will consider the proposal to cooperate with life insurance in the future.
Acleda has provided about US$85 million for housing loans, she added. The benefits to customers and banks would be mutual, as customers would reduce the chances of losing homes, and banks the potential for non-performing loans, In Meatra claimed.
“Long-term housing loans have a lot of risk. Customers have to consider whether they should buy life insurance because it can cover outstanding loans if they have a problem,” he said.
“Their benefit is that their house will not be seized by the bank. At the same time, the bank will also get payment from life insurance and a [reduction of] risk. It means that we can diversify investment risk.”
With only two newly launched life insurers, the market for life insurance products was still small compared to that for general life insurance, the secretary of the General Insurance Association of Cambodia Oeurn Chanvisoth wrote in an email yesterday.
“We only expect that when life insurance becomes a full force in the market that it will help generate more premium for our insurance industry, both for life and non-life insurance,” he said.
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