Kingdom's property insurance sector still in its infancy

David Treal, managing director of AG Cambodia, at his office in Phnom Penh. Photo by: Rick Valenzuela

Cambodia’s draft law on property has paved the way for foreign ownership in the real estate sector, but despite the fact that their home countries often require property owners to buy insurance, few foreign owners in the Kingdom are opting in.

David Treal, managing director of AG Cambodia, an insurance company that caters to expatriates, says that the owners of big companies are the only people currently buying insurance. “When you see the kind of problems you can get into,” he said, buying insurance makes sense for small business and homeowners as well.

Foreigners have a higher likelihood of being held accountable for problems such as fire or injuries that arise on their property, said Treal. Yet, there is an abiding lack of confidence among property owners that insurance will actually protect them in these situations, explained Sung Bonna, the CEO of Bonna Realty Group and president of the National Valuers Association.

“People are starting to trust insurance more, but insurance companies themselves have to do more (to earn that trust),” he said, adding that the lack of exposure to potential Cambodian clients is another issue.

The notion that foreigners must mitigate their particular risk of being held liable for damage or accidents that occur on their property is difficult to support, according to Mathew Rendell, a senior partner to Sciaroni & Associates. Replying by email to questions about the importance of insuring yourself against liability claims, he wrote “I am not aware of any such lawsuits here in Cambodia.”

The banking sector, which was in a similar position earlier this decade, is an example of what better regulations and more trust could do for the insurance industry, said Sung Bonna. Private wealth expanded rapidly, however due to a lack of faith in the system, banks did not immediately benefit. Improvements in regulations inspired more trust and now the sector is thriving.

Future improvements in the regulations around insurance could provide a similar boost and give Cambodians in particular a better understanding of its value with little past exposure to the product. Sung Bonna mentioned that he has never actually heard of an insurance company paying back owners for a fire, suggesting a lack of activity in the sector.

With particularly low demand, insurance companies are trying to attract clients to their product by touting affordability. Non-portables, such as furniture, televisions and desktop computers in a rented apartment in downtown Phnom Penh can be insured against fire, flooding or storm damage for as little as US$10 per month, Treal said. A similar policy in America costs over $50 a month.

Home insurance is also relatively cheap, costing $60 to $1,000 per month depending on the value of the home and the level of protection. AG Cambodia is also gearing their products towards expat interest. Burglary insurance guarantees that the company will reimburse the owner for the value of lost items minus a $500 deductible.

The weak infrastructure for investigating lost possessions in Cambodia has prevented insurers like AG from insuring lost or stolen portable items, and even companies like Infinity Insurance, who do provide a portable product insurance package, has policies that cover a relatively narrow scope of crimes. Hann Sophat, a senior sales executive at Infinity, said that clients would still be responsible “if you take your computer into your car and someone breaks in and steals it.”

There is also insurance available for a wide range of threats to automobiles, aviation equipment, marine cargo, construction projects and people in the workplace, according to industry representatives. One thing that isn’t covered is tuk-tuks, which are seen as falling outside the parameters of what can be reasonably insured.
(source from the phnom penh post newspaper, Thursday, 21 October 2010 15:00 Julie Masis)