The insurance industry has traditionally been seen as an economic indicator used to gauge the prosperity of developing economies by reducing uncertainty and the impact of large losses, while encouraging new investments, innovation, and competition.

Designated as a pillar of Cambodia’s economic stability mentioned in the Royal Government’s Financial Sector Development Strategy 2011-2020, the insurance industry is becoming a vitally important financial institution within the Kingdom.

Although still in the early stages of development, the the general insurance industry grew by 26.7 per cent overall in 2014. According to the latest statistics provided by the Insurance Association of Cambodia (IAC) the value of gross premiums increased from $41.8 million in 2013, to an estimated $53 million in 2014. In the last 15 years since the inception of the Insurance Law in 2000, annual growth has averaged 16.7 per cent.

While growth in the insurance industry dipped to a two per cent low during the global financial crises of 2008-2009, the resurgence of the market heralds a bright economic future, explained Huy Vatharo, Chairman of IAC.

“As the insurance industry mirrors the Cambodian economy, the market has rebounded quickly and shows signs of exponential growth,” said Mr.Vatharo. “As more companies enter the market, it will create a spillover effect that will [increase] the quality and terms of service.”

“A well-developed insurance industry protects society and underpins economic growth in a number of ways,” said Mr. Vatharo. “It provides a socioeconomic safety net that helps relieve the financial impact in the event of a loss. By the very nature of insurance, the financial burden and risk is carried over many shoulders and leads to an equitable society.”

Currently, there are 11 insurance companies and one reinsurance company licensed to operate in Cambodia. Of those 11 companies, six provide general insurance, three offer life insurance, and two focus on microinsurance.

“The level of confidence in the market depends on how fast a claim is settled. So far, claims have been paid on time and there have been no big problems,” said Mr. Vatharo. “Despite in 2011, when [payouts] reached 73 per cent” due to the fire at the June Textile Factory, “the industry has been operating without catastrophic loss.” The overall loss ratio in the last five years stands at 30 to 40 per cent. Now, with a higher level of premium values and new products like life and health insurance entering the market, the industry is better equipped to handle disasters, he concluded.

With the introduction of life, health and microinsurance, companies are now reaching out to the general, largely uninsured, public with dynamic tailor-made products to make individuals less vulnerable to personal catastrophes such as disease or the loss of the main breadwinner in a family.

And accompanying those products, education is essential when conveying promising ideas with tangible benefits.

For instance, Prudential Life Assurance, a subsidiary of the British insurance giant, has placed “education as a core strategy,” said Pankaj Banerjee, CEO of Prudential Cambodia. “While conducting seminars in association with the Ministry of Economy and Finance (MEF), we have seen a phenomenal shift in the resistance to think long term.”

Additionally, last October, Prudential Cambodia Life was the first insurance provider to sign a Memorandum of Understanding (MOU) with the Kingdom’s Anti-Corruption Unit (ACU). “By having the government engaging with companies, this combination shows a good solid recipe for building trust in the overall business environment in Cambodia,” said Mr. Banerjee.

“The key [factors] that will drive the life insurance industry is the young demography of Cambodians, savings habit, and economic development represented in increasing GDP per capita. As the economy continues to grow, we will have more customers becoming aware of the need for life insurance,” said Mr. Banerjee. “Life insurance provides an excellent tool for long term financial planning, savings and sustainability.”

“Currently, it is estimated that there are about one million [target market] people. The insurable population is expected to grow by half a million, or more, over the next five years,” said Robert Elliott, CEO of Manulife.

By also conducting educational seminars in association with the MEF, Mr. Elliott said: “Today, we have successfully communicated to our target customers and have achieved 90 per cent [brand] awareness among Cambodian families in Phnom Penh.”

Due to the novelty of these new products, the value of premiums for life insurance is excluded from official estimates. Nevertheless, IAC chairmanVatharo predicts that in the coming years life insurance will grow quickly while health insurance, primarily dependent on foreign workers well-versed in the need for protection “may slow down a bit until the market is further penetrated.” This, he says, is where education and corporate social responsibility remains essential to broaden the base of those insured. He also sees potential for auto insurance as accident rates continue to increase and only commercial vehicles need an obligatory insurance on Cambodia’s roads.

As more companies enter into the Cambodian market, Vatharo believes that the way forward did not lead to a “one size fits all strategy” but rather out of “a multi-pronged approach dealing with public awareness, improving the capacity of insurance professionals, diversifying innovative products to meet market needs, exercising fair pricing, and improving regulations and supervision in line with international standards,” he said.

“Given sound economic performance projected for this year and years to come, we expect that insurance will experience similar growth as last year,” he said.