The government and four international insurance companies signed a preliminary agreement on Tuesday to join forces and form the first life insurance company based in Cambodia.
Although a sub-decree governing life insurance has not yet been created, the Ministry of Finance, NTUC Income Insurance of Singapore, PT Asuransi Central of Indonesia, Asia Insurance of Hong Kong and Bangkok Insurance of Thailand signed the agreement to form the Cambodia Life Insurance Company.
“We hope that the new Life Insurance Company will make its contribution to the development of a sound financial sector,” Finance Minister Keat Chhon said.
The Finance Ministry has pledged to provide 50 percent of the $7 million in capital needed for the new company, while NTUC will have a 20-percent stake and the others will offer 10 percent each.
Hang Chuon Naron, secretary-general of the Finance Ministry, said that the five partners would now take six to 12 months to complete a feasibility study before the firm can be launched.
Tan Kin Lian, CEO of NTUC, said he foresees the company extending policies to Cambodians in lower income brackets as well as the wealthy elite.
“We can make insurance for a very low cost for low-income people,” he said. “We can make premiums as low as $1 or $2 a month.”
He added that as the incomes of Cambodians grow, they will become more interested in life, health, accident and disability policies, which Cambodian Life will also be poised to provide.
Under current legislation, no foreign-based companies are permitted to sell life or general insurance in Cambodia, he said, though this is not currently adhered to.
“Because there is no life insurance company in Cambodia and there are expats who need these services, the government has chosen not to enforce the provision regarding life insurance,” he explained.
However, once there is Cambodia-based life insurance, the government will enforce the regulation, he said.
Foreign life and health insurance companies would then have to establish full-service offices here and be subject to Cambodian law to sell policies, he said.
Charles Cheo, deputy managing director of Forte Insurance, which claims to be the largest general insurer in Cambodia, said a life insurance industry could take some time to develop.
“To sustain a life insurance industry, you need to have an investment climate…you need to have somewhere to invest the premiums,” he said, adding that with small premiums, it might be tough for a life insurance company to make a profit. “One- or two-dollar-a-month premiums sounds tough,” he said.
On the streets of Phnom Penh on Wednesday, several residents said they would welcome life insurance.
“I like the idea, but don’t know how the system would work,” said a tuk-tuk driver and father of three named Kar, adding that in the tourist season he can earn $500 a month.
A motorbike-taxi driver who gave his name only as Saray, a 37-year-old father of two, said life insurance sounded like an attractive prospect.
“My fees might be enough to pay one or two dollars a month in the long run, over 10 or 15 years,” he said.
