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Once-Growing Insurance Market Faces Challenges

Post-war Cambodia only saw its first insurance agency in 1990, when the state-owned Caminco opened. Nearly 20 years later, a number of private companies have established themselves, but experts say they still face challenges in a market where few understand the benefits and many can’t afford premiums.

“Compared with other countries, our market is very small, because many people have limited knowledge about this sector,” said Chhay Rattanak, president of the Association of Insurance Companies in Cambodia.

There are seven companies now in the country: the private companies Forte, Asia, Campubank Lonpac, Infinity and Vietnam; and the state-owned Caminco and Cambodia Re.

Each seeks to help people and businesses manage risk, which in turn promotes economic growth. And while the number of insurance customers is increasing—premium payments rose from $8 million in 2003 to $20 million in 2008—only about 1 percent of Cambodians have it.

“I don’t understand insurance, and I don’t know how they could compensate us,” said Phnom Penh car salesman Lem Meng Lim, who has not considered insurance in the four years he’s been running his business.

In Cambodia, companies offer insurance on motors, property, marine cargo, personal accident and healthcare, engineering and construction and other eventualities. (There is no life insurance.)

Even if they did understand it, with more than 30 percent of Cambodians living on less than a dollar a day, many can’t afford it.

“Because they have such a low income, what is important for them is their daily life,” said Youk Chamreoun Rith, director of Forte Insurance, the largest company here with nearly half the market.

Mey Vann, director of financial industry at the Ministry of Economics, said his ministry is working to educate people and reform some of the insurance law, including all vehicles have insurance.

Now may be a hard time to grow the industry, however. Premiums fell in 2009 for the first time, by about 10 percent, following growth of 20 percent to 30 percent in prior years.

The downturn caused many factories to close, “so that number of customers will decline and premium [numbers] will fall,” he said.

“We know that our customers are looking to save on their expenses,” said David Carter, CEO of Infinity Insurance. “In some cases, they are cutting back the level of insurance they buy.”

That kind of thinking can lead to increased business risk, he said.

“What can happen in a financially difficult time such as this is customers may not be careful in management of their business,” he said, “because they are looking to cut costs.