Insurers Await Mandatory Vehicle Coverage

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A car is loaded onto a tow truck following a multi-vehicle collision in Phnom Penh (KT Photo: Allison Ludtke).

By Cecelia Marshall for The Khmer Times

PHNOM PENH (Khmer Times) – As the number of vehicles on Cambodia’s roads grows, so do the number of traffic accidents. But insurance companies say in the absence of legislation that makes automobile insurance mandatory, the challenge of convincing Cambodians to insure their cars and motorcycles is as daunting as the country’s traffic accident statistics.

Last year, Cambodians reported over 3,300 car and motorbike accidents, resulting in more than 1,500 deaths. But it is widely accepted that the vast majority of “fender benders” go unreported and are settled on the side of the road – sometimes with fisticuffs.

Stalled Legislation

Despite the high number of traffic accidents, Cambodia is the only ASEAN country that does not legally require motorists to purchase insurance for their private vehicles. Coverage is mandatory only for commercial vehicles.

Legislation has been on the agenda for over a decade. In May, the cabinet approved amendments to Cambodia’s insurance law that would make third-party liability insurance (compulsory) for private vehicles. But the legislation is awaiting ratification by the parliament.

“Having mandatory insurance [would] mean that all accidents get resolved through an insurer, so people can avoid the conflict that can often happens due to an accident,” said Alexandro Hales, a spokesman for Forte Insurance, one of the oldest private insurance companies in the Kingdom.

He said that when motorists are allowed to drive without insurance, people injured in an accident, and often their families, are left holding the cost. It also puts drivers at risk of costly liability claims, which have “the potential to leave people bankrupt and incurring a huge debt which they may not be able to recover from.”

The message, however, has been slow to get through. According to the transportation ministry, less than three percent of Cambodia’s 2.36 million private vehicles carry even basic third-party liability coverage.

In addition, more than 85 percent of private vehicles are motorcycles. They were excluded from the proposed insurance law amendment on the assumption that their owners could not afford insurance. It is a glaring omission, as research has shown that motorcycles are involved in 70 percent of accidents that cause fatalities.

“I would be surprised if even one percent of motorbikes are insured, which is unfortunate as it often shifts the blame [in road accidents to] cars,” said Michael Girling, CEO of Infinity General Insurance. “Even if a moto hits a car, it is the driver of the car’s responsibility.”

Selling peace of mind

Cambodian National Insurance Company (Caminco) was the first local insurer to offer private vehicle coverage and remains the largest auto underwriter in the country. Ten other insurers now offer motorist insurance and personal accident policies.

Kheang Ratanak, assistant manager of the underwriting department at Forte Insurance, says Western expats are accustomed to compulsory vehicle coverage in their home country and need no convincing. But the majority of Cambodians see vehicle insurance as a luxury they cannot afford.

“It seems that [Khmer car and motorcycle owners] overlook insurance,” said Mr. Ratanak. “Many of them think it’s just a waste of money.”

Without of compulsory motorist insurance, underwriters face a tough battle convincing the public of the value of insuring their vehicles. Mr. Girling said many of his company’s potential clients regard insurance as unnecessary, claiming it is against their culture or “comes across as bad karma.”

But strong economic growth is driving upwardly mobile Cambodians to purchase more private vehicles. And slowly, they are recognizing the value of protecting their property and having liability coverage.

“[Auto] insurance is growing on the back of that,” said Mr. Girling. “Opinions are slowly changing… and we hope to see greater appreciation of and confidence in insurance.”

Better Enforcement Needed

Insurers say their job would be easier if legislation were enacted to make auto insurance mandatory. They are also hopeful that the government will tighten enforcement of vehicle registration laws.

According to Article 79 of the Cambodia’s Traffic Law, anyone found driving a non-registered vehicle is subject to a fine of up to $50,000 and up to a month in prison. Yet prosecutions are unheard of. Transportation ministry research shows that only one in five private vehicles on the road is registered.

“Nobody is enforcing it,” said Mr. Girling. “A law is only as good as its enforcement.”

One challenge that Cambodia faces as it gears up for ASEAN integration is that motorists are expected to conform to the 10-nation bloc’s protocols concerning insurance coverage. One rule is that all private vehicles are adequately insured against damages or injuries arising from road accidents, and that all drivers carry proof of insurance.

Without a Blue Card, an insurance identification card recognized in all ASEAN nations, Cambodians are prohibited from taking vehicles across borders. But accidents can happen anywhere. Insurers are focused on persuading Cambodians to purchase coverage to secure their vehicle, self and others.

“We try to tell customers that it’s peace of mind,” said Mr. Girling.

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