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Why insurance laws need enforcement

9 chhay businesspage9 scott howes

Since 2008, Chhay Rattanak has led Cambodia’s infant insurance industry, heading the Insurance Association of Cambodia and the Cambodian Reinsurance Company as chairman and managing director respectively. He spoke to the Post’s Low Wei Xiang about what more has to be done to help the industry mature.

What does the Insurance Association of Cambodia (IAC) do?
We changed our name from the General Insurance Association of Cambodia to IAC in the last three months. Before, we represented only non-life or general insurance companies – there are currently six – in raising issues to the government, as Cambodia did not have life insurance until the end of 2012. Now we have three life insurance companies, and they wanted to be part of the association as well, thus the name change.

Most ASEAN countries have separate associations for general and life insurance companies, but Cambodia combines them into one, as the life insurance sector is still small.

What are the types of insurance in Cambodia and which ones are popular?
Generally, life insurance deals with issues associated to the insured’s death, while general insurance deals with everything else. For life insurance, as far as I remember, the industry has only set up three products in Cambodia related to savings, endowment and term life insurance. Meanwhile, our general insurance products are comparable to other countries, and include fire, motor, health and personal accident insurance.

Fire insurance is the most popular, constituting 28.9 per cent of the insurance market in 2012. Its take-up was spurred in the last few years by garment factory owners who want to protect their assets, although it is not mandated by law.

Among the industries, the garment sector has the highest insurance take-up rate. Meanwhile, the construction sector is not as highly insured, though construction insurance is compulsory. Enforcement is not as strong yet, because their licenses are given by the Ministry of Land Management, Urbanisation, and Construction, so they can start building without insurance, which is handled by the Ministry of Economy and Finance. We are now setting up a working group to deal with this issue.

How is insurance perceived in Cambodia?
Cambodia’s insurance industry is still young, and many people still do not understand what insurance is, or worry they will not receive their payouts. But the situation has improved from the previous years, because IAC has been working with the government and insurance companies to increase public awareness.

Right now we are mostly reaching out to universities. The older generation sometimes has difficulty understanding what insurance is, and we target university students so that they can explain to their parents. Insurance is very hard to understand, so we have to keep our explanations basic and simple.

Some companies buy insurance overseas, is it a problem?
They are not allowed to do it, as according to the law, if you are operating in Cambodia you have to buy insurance locally, not overseas. This is to protect the insurance companies here. We know some foreign-run companies buy from overseas. I don’t know why, but we are still figuring out a solution.

What is re-insurance, and what does the Cambodian Reinsurance Company (CRC) do?
Re-insurance companies pay for a portion of the claims given out by insurance companies to their customers. For example, when an insurance company issues a policy for $100,000, they can re-insure a certain percentage to CRC, which is the only re-insurance company here. Based on the law, all re-insurance transactions must be subjected to 20 per cent as cession to CRC.

CRC started out in 2002 as wholly government-owned, but because the industry lacked expertise, Asian Insurance International was brought in in 2004 with a 20 per cent control of CRC.



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