When Hoy Lean-gkheav needed surgery last summer, the US$500 bill for her seven-day stay at Calmette Hospital was less of a burden than it might have been a month before. That’s when she took the leap and purchased something she had never heard of:  micro-insurance.

Heng Chivoan/Phnom Penh Post

Farmers harvest and bag rice in Battambang province’s Koas Krala district.

“My husband and I decided to buy policies because we thought it would help if we had any unexpected problems,“ says the mother of three, who was convinced after representatives of Prasac Microfinance Institution came to her Kandal-province village to tell residents about a low-premium health and accident micro-insurance plan.

Hoy Leangkheav now expects her policy, which costs US$5 a year per person, will pay more than $100 of her hospital bill. “It will help us,” she says of the coverage.

The Ministry of Economy and Finance has reported that fewer than three per cent of rural Cambodians have any type of insurance, micro or otherwise, leaving them with little protection from the sizeable expenses that typically come with medical care.

Although traditional insurance premiums may be far beyond the budget of Cambodians like Hoy Leangkheav, the recent push of micro-insurance policies – smaller payments providing at least some coverage – is aimed at exactly this demographic.

Just as the country’s rural poor have found access to loans through micro-finance, micro-insurance companies plan to offer the same kind of access for health and other types of coverage.

Proponents see low-premium micro-insurance plans such as Hoy Leangkheav’s – the result of a partnership between Prasac and Forte Insurance – as an affordable risk-management option for such communities.

As Cambodia’s insurance sector matures, the low rate of insurance coverage also points to an untapped market that private companies are increasingly eager to access.

Even so, recent government efforts to boost private insurance coverage in rural areas are off to a slow start.

So far, only one private company, Prevoir Kampuchea Micro-life Insurance, has registered for a temporary micro-insurance licence from the Ministry of Economy and Finance since the agency began issuing them in July, according to In Meatra, head of the MEF’s insurance division.

PKMI’s expected January launch was recently pushed back to February, according to company representative Ngeth Chou. In Meatra said two more micro-insurers would soon be requesting licences, although he declined to name the companies.

Although no licensed micro-insurers are operating in the country, a handful of micro-insurance operations do exist as either partnerships between MFIs and general insurance providers or as nonprofit plans offered through the Community-Based Health Initiative, which covers the cost of care at Ministry of Health-operated health centres and hospitals.

MEF officials were unable to say how many unlicensed micro-insurers were operating in the Kingdom.

Those familiar with existing micro-insurers have said they have benefits for both rural communities who could otherwise not access insurance products, and insurance companies who might otherwise not reach rural consumers.

Partnerships between private insurers and established MFIs are the most effective way to introduce micro-insurance products to rural communities, according to Mayur Ankolekar, a micro-insurance expert affiliated with Micro-Insurance Academy in Mumbai, India.

“It’s a good starting point. The poor have never heard of insurance. They need to be sensitised. MFIs in Cambodia already have 30 per cent penetration in the rural market,” Ankolekar says. Existing infrastructure makes it easy for MFIs to serve as agents for insurers, he adds.

This proved true for Cambodia Health Committee MFI, which began offering credit-line and life insurance policies to rural customers in 2009.

Yearly premiums for the policies are 1.5 per cent of the original loan for credit-line insurance, which pays off loans in the case of death or permanent disability, and $12 for life insurance.

The program has 6,000 policyholders, and the low claim rate of 16 to 18 per cent has allowed for considerable returns, according to Sa Sok, CHC’s underwriting officer.

“It has been profitable for us,” he says, adding that CHC plans to register for a temporary license with the MEF in the next few months so as to operate as an independent micro-insurer.

Meanwhile, Prasac MFI chief executive Senacheert Sim says  about 20 per cent of clients file insurance claims under their program – fewer than Prasac would like.

“We would like to have more claims, so people know the benefits of insurance. Many people still don’t understand it,” he says.  

With recent reports of exorbitant interest rates and mismanagement of some MFIs in the country, Micro-Insurance Academy’s Ankolekar says strong regulation for this new industry is critical.

“There must be full disclosure and transparency. That is the role of regulators,” he says, noting that micro-loan and insurance products should be kept separate so policy benefits are clearly defined.

Yet the existing regulatory framework and licensing process, meant to encourage private actors to provide micro-insurance by lowering capital requirements, is proving a headache for some existing non-profit micro-insurance operators.

Members of the Community-Based Health Initiative, a network of nine non-profit micro-insurers throughout the country, are required to apply for licences and provide proof of funding for three years – a difficult requirement for organisations struggling to find funding.

A September, 2011 circular issued by the MEF urged CBHI-related operators to register for micro-insurance licenses and said they would be fined 50 million riel for non-compliance, according to Phoung Pheakdey, the recently retired chairman of the CBHI network.

“We are worried,” says Mut Nin, director of Community Health Organisation in Battambang, where more than 8,000 people have purchased policies ranging from roughly $3 to $17 a year, depending on family size. “CHO is new, [and] we don’t have a fixed donor.”

Phoung Pheakdey says he has written a letter to MEF officials outlining CBHI’s concerns with the temporary licensing process, but has yet to receive a response.

MEF officials have declined to comment on the issue.

“So far, we haven’t got any clear answers,” Phoung Pheakdey says.