With one of the most underinsured populations in Asia, as well as an economy growing at 7% a year, Cambodia has become a magnet for both life and non-life insurers, reported the Nikkei Asian Review. AIA, Asia's largest life insurer, is the latest to enter the market following its licence approval last month, resulting in a total of six life and seven non-life insurers in the country.
However, there remains a challenge in making the population understand insurance, Mr Huy Vatharo, Chairman of the Insurance Association of Cambodia (IAC) told the Nikkei. The young market continues to show remarkable growth, though there remain challenges of low public awareness, the lowest per capita GDP in Southeast Asia with nominal monthly wages at 642,000 riel (US$176) and an immature capital market. For life insurance, which was introduced in 2012, premiums doubled last year.
Need to convince population of insurance’s value
Nonetheless, the insurance penetration rate was less than 0.5% in 2015, according to the IAC, compared to the 1.6% of the also-nascent Vietnamese market. The country's complex history of years of repression and failed politics makes it difficult to encourage people to pay for something that may or may not occur in the long term, said the Nikkei.
"People here tend to live for tomorrow, not for the distant future," said Mr Tondy Suradiredja, chief executive of Cambodia Life Insurance, the country's first life insurer. "They think: Why do I have to think about my retirement if I am not sure what is going to happen with the government?"
Offering low daily premiums
To reach out to potential customers, Cambodia Life will start with a form of microinsurance, selling low-premium insurance of about $1.2 a day at the 3,700 plus agents of Wing (Cambodia), the country's leading mobile payments provider. Two packages providing coverage of $5,000 and $10,000 will be rolled out and premiums can be paid on either a daily or monthly basis.
Manulife Cambodia has launched several marketing campaigns since it started operations in 2012. It has been holding seminars across the nation to explain about life insurance and its role in people's lives. More than 75,000 have attended to date. Manulife's offerings in Cambodia are mostly endowment policies and savings products—according to Mr Vatharo of the IAC, more than 95% of the life insurance policies sold in the market are endowment products.
Premiums in bank deposits
Insurers operating in the country will have to find long-term investment destinations for their growing assets, while Cambodia currently has no bond market. Meanwhile its stock market is fledgling, with only four listed companies and the government requires insurance companies to invest 75% of their premiums within Cambodia.
Most of the insurance companies invest in bank deposits. Manulife also deposits 75% of its premiums with local banks, but leaves the remaining 25% with its reinsurance group company in Hong Kong, reported the Nikkei.
Despite the challenges, the insurers are confident the outlook is bright, with more foreign hospital operators entering the country to provide quality health care.