When Long Piseth took out a $40,000 home loan from a bank earlier this year, he discovered the tougher side of life. Every month, he needs to allocate 60 percent of his and his wife’s combined income to repay the loan.

However, the 31-year-old, who is the family breadwinner, is also adamant against his wife being saddled with debt should a mishap – or even death – occur to him. Hence, the decision to insure himself and his family was made.

“I decided to set aside nearly $500 per year for life insurance so that if something bad happens to me, my family will still be secure,” he said, adding that while he would honour his home loan repayment contract, the insurance he has bought for his family would come full circle to him for his children’s future. “It is hard to spend more, but the insurance helps me to have peace of mind.”

Piseth is among 16,000 Cambodians who have purchased premiums for life insurance in the first quarter of 2017.

Cambodia’s insurance industry saw impressive growth in this first quarter of this year, with life insurance accounting for the largest upswing by percentage while general insurance continues to make progress, according to an annual report by the Insurance Association of Cambodia (IAC).

Overall gross premiums in Cambodia’s insurance industry reached $36.2 million in Q1 of 2017, marking a 24 percent increase from $29.2 million in the same period last year. Among that, life insurance grew at about 63.5 percent – from $9 million in Q1 of last year to $14 million in the same period this year – while general insurance premiums rose by 6.3 percent to $21.6 million.

Ngeth Chou, senior consultant at Emerging Markets Consulting (EMC), said there were several factors driving the development of Cambodia’s insurance industry. Among that, banks offering home loans making it mandatory for homeowners to purchase fire insurance or life insurance were a critical growth propeller.

“Bankable clients are familiar with financial services, thus life insurers use that opportunity to reach their clientele via bank assurance models (bank and insurance partnership model),” he said. “In the future, home loan borrowers may be required by banks to purchase life insurance as well to make sure banks are risk-free if the households’ sole providers become disabled or die.”

According to Chou, factors critical in expanding the insurance sector include partnership models between banks and insurance companies, an uptick of general confidence in the market, and a burgeoning middle class.

While more people are becoming aware and now understand the importance of life insurance, said Robert Elliott, CEO of Manulife Cambodia and vice-chairman for life insurance in the IAC, home loan protection remains an area for growth.

“Life insurance provides peace of mind for the family ensuring that if something happens to the breadwinner, the loan is paid off by the life insurance company,” he said, adding that the life insurance market penetration in Cambodia remained very low, at approximately 0.2 percent of GDP, compared to the rest of ASEAN where market penetration averages at up to 4 percent.

“This means we still have a lot of opportunities to develop the life insurance sector and to help protect the financial future of Cambodian families.”

Nevertheless, several life insurers have entered the still-nascent sector this year, eager to take advantage of a wide-open market with the belief that Cambodians are ready for their products. In addition to four life insurance companies currently operating in the market, two new life insurance companies – Bangkok Life Assurance and AIA – officially launched operations in Cambodia this May with the aim to grab hold of a market that has seen rapid expansion.

Huy Vatharo, chairman of the IAC, said the growth in both life and general insurance reflected increasing awareness among Cambodians of the notion of insurance, as well as mirroring healthy economic growth and investment. 

According to Vatharo, among gross premiums of general insurance, property insurance contain a large share of general insurance premiums especially fire insurance on new homes, enterprises, and factories. He added that health insurance and vehicle insurance take up a minority share, but are fast gaining traction.

“New insurance providers who join the market are offering new products and assistance to increase public awareness about insurance,” he said. “I expect that the growth rate of gross premium of general insurance will have double digits this year.”