The Kingdom’s auto insurance sector is gearing up
By Philip Heijmans
With the number of cars on Cambodia’s roads growing at a consistent pace, high-end automotive distributors are jockeying for a foothold in the market, but they are not the only ones who stand to benefit from Cambodia’s splurge on cars. Working on the sidelines, the Kingdom’s small field of insurance firms is turning a quiet profit in a once dormant industry.
Revenues generated from automotive insurance premiums grew 23.88% to $5.18m through the first nine months of 2012 compared to the same period last year, according to data from the General Insurance Association of Cambodia (GIAC).
“We are seeing an increase [in auto insurance policy holders], which is simply due to more cars coming into the country and the continued take up of motor insurance,” said David Carter, CEO of Infinity Insurance, adding that Infinity saw a 28% increase in auto insurance premiums last year compared to 2011.
It is unclear how many cars are insured, but insurance companies have been able to bank on a reasonable level of payouts on claims thus far, totalling just $1.28m through the first nine months of 2012.
With more cars on the road and little regulation to curb the current high rate of accidents, that may soon change.
“Auto accident payouts are within reasonable limits, but they are increasing at a somewhat concerning rate due to rising medical costs, values of cars and longer time periods to reach settlements,” Carter said, adding that most mishaps derive from poor traffic law enforcement, speeding, drink driving and the lack of motorbike helmet use.
With traffic accidents a major issue in Cambodia, insurance firms must remain cautious about which vehicles they insure until driving practices are better regulated, said Ty Atith, a senior underwriter at the Cambodian Reinsurance Company.
“The government has taken many actions to regulate the behaviour of cars on the roads, but it will take time to change the old culture,” Ty Atith said. “For the moment, [insurance] firms will have to restrict policies to low- and medium-exposure vehicles, so that they… avoid vehicles that are likely to overstep regulations.”
He said that while it is compulsory for all commercial vehicles to have insurance, little is being done to enforce that rule and it may be years until all vehicles are insured. Even so, without the implementation of traffic laws to reduce the number of accidents, compulsory insurance laws may not necessarily benefit firms.
“At the moment, the auto insurance industry is healthy, but when it becomes compulsory for all vehicles in the future, that will be hard to say,” Ty Atith said. “I have noticed that some vehicles here are too old and I often hear about brake failures for heavy loaded vehicles due to improper maintenance and checking. We will have to look into the experiences of similar markets in Asian countries.”
