In Largely Untapped Market, Life Insurance Companies Eye New Models

After considering the decision for nearly a year, Chhunhak Phen, an employee of a German development NGO in Kratie City, decided to buy life insurance.

“It’s a 10- to 15-year contract,” he said. “If you don’t have any problems—any accidents—in 15 years, they give you all your money back.”

The premium, he said, is a few hundred dollars a year, depending on the purchaser’s means and desired payouts. He learned about the plan, called eduSave, through a friend who runs workshops for the provider, Prudential, in Kratie province. While life insurance is, as he describes it, “a new story in Khmer culture,” and it hasn’t yet caught on with most of his friends, he is convinced of its potential benefit to his family.

“I have two children,” he said. “If I die, I want them to take the money and to continue studying, so they can work for their futures.”

Mr. Phen is one of a growing number of middle-class Cambodians purchasing life insurance. Most of the people he knows who have bought it, he said, are fellow NGO workers.

While enthusiasm is picking up four years after two global insurance providers—Manulife and Prudential—entered the country, the Cambodian market remains tiny, a mere fraction of that seen in neighboring countries.

With penetration low, insurance companies have reached a crossroads. On the one hand, emphasized Robert Elliot of Manulife at Cambodia’s first banking conference last Wednesday, traditional insurance companies are working to improve their own outreach—in particular, through winning the trust of their staff and customers.

“The moment of truth was our first death claim,” Mr. Elliot said, speaking of Manulife’s 2012 start. “When the first claim came, I could see my staff thinking: Are you actually gonna pay? This is important. You have to pay in six to nine days.”

Mr. Elliot declined to say how much Manulife paid out, for that claim or since 2012. But training staff to trust the company they work for is a crucial part of the operation, he said, especially in a country where many don’t see the point of life insurance in the first place.

“There’s an attitude in Cambodia: I’ll self-insure,” he said.

On the other hand, as companies like Manulife and Prudential work to pitch to a slowly warming middle class, others are testing a menagerie of means to reach a more varied, poorer demographic.

Representatives of life insurance companies and South Korean banks discussed at the conference that the idea of “bancassurance”—selling insurance products to clients through their bank accounts. It’s a winning strategy in Europe, Mr. Elliot explained, as the most likely buyers of insurance products everywhere are people who have credit cards and savings accounts. However, bancassurance as such remains illegal in Cambodia. Banks can refer customers to insurance providers, but cannot yet package their products.

Proposed legislation to remedy this situation, as well as government tax incentives to banks for insuring their customers, have yet to materialize. The reason for this is that banking, as well as insurance, is a relatively new sector, Mr. Elliot said.

And, he added, “you have to have people actually paying taxes before you give tax credits.”

Meanwhile, a number of providers are working to spread so-called “microinsurance” among lower income levels, through a variety of means. The Swedish provider Bilvik, partnered with Smart, offers a plan that promises $1,000 payouts for $0.80 deducted from every monthly phone bill.

For an economy with a large informal sector, working in smaller amounts has proved a winning strategy—Prevoir, one of Bilvik’s rivals, now has some 250,000 policies, more than seven times Manulife’s, according to Solene Favre, the company’s CEO.

Much like the microfinance institutions Prevoir partners with, microinsurance targets lower-income individuals who aren’t as familiar with insurance or loans, offering them a straightforward $3 or $6 annual premium, Ms. Favre said.

As clear as Prevoir attempts to be, Ms. Favre said she was certain that there would be some claims that have gone unpaid, often because users are unaware of how to cash in on a policy.

“We need to work more—work harder—to make people understand how they can benefit from us,” she said. “We want to pay back our claims.”

Like most businesses in Cambodia, insurance providers are regulated—but it is unclear how, or how well. Prevoir was willing to give numbers on how many claims it had paid out—2,800 so far this year, Ms. Favre said. However, other insurance providers, including Manulife, were unwilling to provide this information.

“We send monthly reports and have external audits,” Ms. Favre said. “But maybe some companies don’t send their reports, and the [Ministry of Economy and Finance] doesn’t say anything. I know they are revising the current legislation. And they are understaffed.”

Spokesmen for the Ministry of Economy and Finance were unreachable for comment.

Correction: A previous version of this article misstated the name of the CEO of Manulife.

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