Insurance is still in its infancy in Cambodia, but it is beginning to take shape as income growth accelerates and a rising, educated middle-class place more importance on de-risking and safeguarding their future.
Insurance is a broad term, but in summary, it is a form of managing risk. When an individual purchases insurance, you transfer the cost of a potential loss to the insurance company in exchange for a fee, known as the premium.
In other words, insurance is essentially a promise of compensation for potential future losses in exchange for a periodic payment. Insurance can take many forms, but the foundation of any insurance framework is built on the premise of protecting the financial well-being of an individual, company or other entity in the case of unexpected loss.
When it comes to insurance, there are a range of risks and events that you can insure against, but it is widely acknowledged that life insurance, personal accident insurance and health insurance are some of the most highly valuable types of insurance.
The nascent life insurance sector in Cambodia is less than five years old, while health insurance ranks low in importance compared to mature markets like Singapore and Australia. While there is a growing chorus of citizens demanding better public healthcare in Cambodia, and Southeast Asia more broadly, a rapidly growing private sector is stepping in to fill the gap.
Big-name firms such as Prudential, Forte, and Infinity Insurance have set up shop in Cambodia in recent years – and while they are competing for business in what is a relatively small market share, solid business growth is being tracked.
According to the Insurance Association of Cambodia’s (IAC) 2015 third-quarter report, non-life insurance premiums grew 20.2 per cent over the past year with total premiums topping $46 million. The uptake of life insurance in the Kingdom is also increasing. Gross premium of life insurance grew to $8.9 million during the January to March period this year, up 123 per cent compared to the same period last year.
Still, there’s a long way to go. While policy holders are on the rise, the overall penetration rate is low. According to Robert Elliot, CEO of Manulife, only 30,000 individuals are on a life insurance policy in a country which has a population of 15 million people.
Despite the unfavourable numbers, there are greenshoots. According to Ernst & Young’s 2015 Global Insurance Outlook report, the growth of the Asia-Pacific’s overall economy, middle class and high net worth population offers enhanced opportunities to sell personal lines, commercial lines and health insurance.
“As consumer wealth rises and more sophisticated financial advice and solutions are sought, the potential for premium from the sale of personal lines insurance to protect homes and automobiles increases,” the report noted.
“The opportunity to offer private health insurance in Asia-Pacific is also expanding, due to rising individual income levels and government budget constraints.”
Meanwhile, a changing insurance landscape is afoot as mobile technology rapidly expands across the region, creating opportunities for insurers to tap new sales and service channels.
“Asia-Pacific insurers will need to extend their digital presence in 2016 and reconsider how they interact with customers and handle internal processes,” E&Y noted in its 2016 Asia-Pacific Insurance Outlook report.
“Digitization is opening new avenues for insurers to leverage sales and service channels and accommodate rapidly changing customer preferences.”
The Cambodia insurance sector is already at the forefront when it comes to leveraging digital technology. Manulife has adopted mobile technology as a platform for its insurance products, though not for the sale of policies.
Separately, telecom operator Smart has emerged as a top life insurance provider, offering its more than 7.5 million subscribers the option of purchasing insurance policies underwritten by BIMA and Forte by dialling a short code on their mobile phone. With education around insurance gaining momentum, and mobile-delivered insurance delivering coverage to a broad reach of citizens, it’s clear the old adage “the best course of action is to prepare for the worst, and hope for the best” is catching on here in the Kingdom.