Cambodia’s leading financial institutions and its central bank held an industry workshop to discuss the new Prakas on the insurance sector which removed the referral-only requirement for the Bancassurance model.
Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank’s client base.
The Association of Banks in Cambodia, Cambodia Microfinance Association and Insurance Association of Cambodia organized the workshop and were supported by the Insurance Regulator of Cambodia of the Non-Banking Financial Services Authority, and the National Bank of Cambodia.
In March, the NBC released its Prakas on Conditions for Bancassurance Business of Banks and Financial Institutions allowing banking and financial institutions to provide more Bancassurance services more widely to contribute in improving financial inclusion in Cambodia by increasing the public’s access to insurance services directly from banking and financial institutions.
“As a regulatory authority, we are always concerned about the potential risks of this service, especially the risk of reputation, if the staff of the banking and financial institution makes an incorrect and unprofessional explanation of bancassurance services,” said Kith Sovannarith, 1st Deputy Director of General of Banking Supervision, National Bank of Cambodia during the workshop.
Previously the NBC had approved financial institutions to only provide bancassurance through the referral model, meaning that banking and financial institutions can refer clients to insurance companies as they have no right to sell insurance products directly.
“The referral model only is an obstacle to the insurance companies since they cannot provide bancassurance services to customers widely, and that alternative models have not yet had clear regulation because the market is still in its early development,” Sovannarith added.
Chair of Cambodia Microfinance Association, Kea Borann, said that the workshop played an important role in alignment with the national strategy on financial inclusiveness 2019-2025 that engages the banking and finance sector and the insurance sector to bolster the operation of bancassurance. The joint effort between the two sectors will also raise awareness and confidence among the consumers and public on the insurance service in Cambodia.
In Q1 this year Cambodia’s insurance sector continued to grow at 16.3% to record $85 million in total premiums, according to a report from the Insurance Association of Cambodia. The market size was listed as 1.2 million customers which comprised of 380,000 life insurance clients, 510,000 purchasers of general insurance (health and individual accident insurance), and 280,000 micro-insurance policyholders.
In 2020, the sector saw premium growth of 7.3% to $271.5 million as claims paid out to policyholders in 2020 totaled $11.3 million. Cambodia is considered one of the region’s least insured countries with its market penetration below 1% compared to GDP.