David W Carter, chief executive officer of Infinity Insurance, talks about the opportunities and challenges of building a new insurance industry in Cambodia.
David W Carter, CEO of Infinity Insurance, considers Cambodia's emerging insurance market, which he says is expected to grow despite economic woes.
What do you think about the perceptions of Cambodians towards buying insurance?
Generally speaking, I would say that there is not much awareness of insurance among the population as a way to manage risk. There is also a certain level of scepticism about how insurance works, but I would say that this situation is changing very quickly, as shown by the increasing number of customers who are buying insurance. The market can be broken up into the business consumers and personal consumers. Businesses are more accustomed to using insurance versus personal consumers.
How strong is the insurance sector in Cambodia?
Currently, the insurance industry is very small, with the insurers' main activities being undertaken in Phnom Penh, Siem Reap and Preah Sihanouk. In other provinces, average monthly incomes are still low, most of them being less then US$50 per month, so this is one of the challenges to the developing insurance industry in Cambodia.
Could you estimate how many Cambodian people can afford to buy insurance?
The population of Cambodia is approximately 14 million. I can estimate that between one and two percent of the population, most of them businesses and urban residents, can afford to buy insurance, this being mainly for their businesses, cars, motorcycles and houses.
Could you estimate how much the insurance sector earns each year in Cambodia? And what is the revenue of Infinity Insurance?
We estimate the total market premiums were around $20 million in 2008, up from about $17.5 million in 2007, as reported by the Ministry of Economy and Finance. Cambodia has five insurance companies: Infinity Insurance, Forte Insurance, CAMINCO, Asia Insurance and Campubank Lonpac. There are no brokers, and there is one registered agent. There is one reinsurance company supporting the market, and so the reality is that this is a very small market, but it is growing quickly. As we saw, from 2006 to 2007, premium income increased by 40 percent. In terms of market position, Infinity ranks about third place in the market of five.
Is Cambodia's insurance market affected by the global financial crisis? Why?
We expect that the insurance market will outpace Cambodia's GDP growth for the next year.
Firstly, we are affected by customers who experience downturns in their business or in some cases even cease operations. We have seen this in the garment industry and also construction, where some projects have been put on hold. There is, therefore, a direct impact on the insurance market as a client may choose to reduce purchasing levels or cease buying insurance altogether. Secondly, there is the phenomenon experienced around the world during times such as this where we see recession-related losses. This is where customers reduce their expenditure on risk management to lower expenses. This can directly impact on the level of losses experienced by insurers.
What is your growth projection for the insurance industry in Cambodia for the next few years?
We expect the insurance market to outpace Cambodia's GDP growth over the next year. So, if GDP grows by five percent, we expect the insurance market premium will increase by 10 percent minimum. This is mainly due to the rise in demand for insurance as more awareness towards the advantages of buying insurance grows. This projection can change dramatically if we have a substantial development such as an oil- and gas-discovery off the coast.
What is your assessment of the economy in general?
Well, I think that the crisis is going to slow the growth in the country. Of course, it is going to decline in the garment and real estate sectors, but other sectors such as agriculture and tourism still rise, and businesses are still going on, but not at the same pace as in the past.
Who are the potential customers for insurance?
We are targeting people who have assets that they wish to protect and [who have] the ability to pay a premium from their household or business income. Insurance is seen by many in Cambodia as a luxury, whereas in more developed countries it is viewed as an essential purchase. Insurance is simply a contract to "promise to pay" in the event of certain happenings. The potential customers are those that understand this concept and have trust in our commitment to honour the contract. Typically, business customers are more familiar with insurance than customers.
You said the insurance industry in Cambodia is small. Do you think five companies are too many?
I think that the number of insurers for such a small market is probably adequate for the moment. I think that the products and services offered by the market as a whole needs to be improved to keep pace with rapid change. I am talking about the increasing demand for more sophisticated solutions for clients. In years to come, I would expect there will be more market participants, and we believe that there will be two potentially new entrants this year. I would expect that in the next two or three years, we would see more insurance companies, and perhaps a broker, to start operations in Cambodia.
Is there fair competition in the insurance industry?
Infinity Insurance launched in Cambodia in July 2007, so we are a relatively young company. I can tell you that our approaches to clients have been very well received. ... Clients are always looking for choice and an alternative view. Infinity is now in the position where we believe that we have about 15 percent of the insurance premium market share in 2008, and we expect to reach 17.5 percent this year. I think that clients now enjoy a fair level of competition in the market.
Could you compare Cambodia's insurance industry to those in neighbouring countries such as Vietnam, Laos and Thailand?
The industry here and in Laos is very small and developing. ... Vietnam and Thailand are much larger ... serving customers who are more aware of insurance. We look at these countries to see what the future holds for the Cambodia market.
Interview by Nguon Sovan