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.
Lauren
Barrett
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