Life insurance renewals up over 70% in 2023
Life insurance renewals up over 70% in 2023
In an indicator that Cambodians seem to have more trust in the benefits of insurance, renewals drove life insurance business in 2023 with more than 70 percent growth.
Overall, the insurance industry saw negative growth (0.5 percent) in 2023 as its most important sales partner banks were going through turmoil with the real estate crisis in Cambodia. Banks saw loan growth hit it lowest in two decades of 4.8 percent to $57.6 billion in 2023; this in turn had a cascading effect on insurance sales – with total gross premium dropping 0.5 percent in 2023. This compares to a growth rate of 14.9 percent the previous year.
Industry players said high renewals show that Cambodians now have more trust in the system. The gross premium from renewals at $130 million formed 67 percent of total life insurance sales of $194 million. Renewals were the sole driver of life insurance growth as single premium sales fell 38 percent year-over-year to $12 million and regular premium sales fell 10.4 percent to $51 million in 2023.
In terms of gross premium – an important indicator of sales in the insurance industry – renewals saw 10.5 percent increase to $130 million. And in terms of the number of policies, renewals grew 71 percent.
A combination of factors has led to the growth – factors like government creating awareness and the impact of Covid being a wake-up call for many in Cambodia. Insurance companies point to the regulators’ (National Bank of Cambodia [NBC] and Insurance Regulator of Cambodia [IRC]) educational programmes for the public to learn about life insurance benefits and long-term financial planning.
Covid-19 also had a role to play. “Our claim payouts in 2023 increased to 21 percent YoY (death, disability, surrender and maturity benefits). Thus, more and more customers had seen the real benefits of getting themselves protected with life insurance policies. Covid-19 was also a wakeup call for many Cambodian customers that everything is fragile, specifically health and lives,” said Prou Sythan, CEO, Forte Life Insurance Company.
Industry players say the strength of the renewal business is a positive. “Renewal is always cumulative. So it always grows significantly as new business for year 1 becomes renewal for year 2 and onwards. So as an example.. In addition to renewal policies of 2022, new business of 2022 becomes renewal business of 2023,” Mandar Hastekar, CFO and interim CEO, Prudential Life (Cambodia) Insurance Plc told Khmer Times.
But for 2023, in terms of new business, there was a slump. New business declined 3.3 percent to 173,031 policies. This could be again due to the slowdown in banking – as banks are an important sales partner for insurance companies in Cambodia. Industry players say, insurance sales via banking form as high as 70 percent of total sales; followed by sales by agents at 27.5 percent of insurance policies and the remainder being sold by corporate brokers and digital sales on companies’ websites.
When it came to the number of policies – renewals saw the most growth. New business declined 3.3 percent, policies in force grew 10.7 percent and renewal business grew 71 percent. “So high growth rate is definitely an indicator of increased customer base having insurance covers year on year and industry expanding in general,” the Prudential interim CEO said.
In terms of renewals – term life policies saw a 407 percent increase, followed by group policies at 207 percent and endowment policies at 59 percent.
“We have seen a shift in some life insurers’ strategy to promote more protection products. It is more affordable for customers and easier to onboard for the companies (simpler underwriting).
Besides, from the bottom-line perspective, protection product is more profitable and predictable given the absence of the maturity, dividend or surrender benefits,” said Forte Life CEO Sythan.
“For group policies, a few companies like Forte Life, which has always been a market leader in that space, have invested more in brokerage and direct sales channels to promote group product during that time. For endowment policies, the growth is a natural trend since most policies sold since 2012 have been endowment ones,” added Sythan.
