Article 1 of the Law on Commercial Rules and Commercial Registration, promulgated in 1995 and amended in 1999, defines trade as an activity of buying or selling goods or services, which are regularly performed for the purpose of exchange or profit. In addition, Article 2 of the same law provides that a trading or commercial activities also include all kinds of insurances. What are the activities of the insurance business? This article briefly discusses this insurance business. Unless otherwise stated, the articles referred to in this text are those of the Law on Insurance, promulgated on 4 August 2014.
Law on Insurance stipulates that this law aims to (1) strengthen the management and supervision of the insurance business, (2) determine the management of insurance operations and conducts of insurance business, and (3) promote competition, integrity and transparency in the field of insurance. (Article 2) Furthermore, the same law states that the Ministry of Economy and Finance has the authority to issue regulations governing and supervising the insurance business in accordance with the provisions of the Law on Insurance. (Article 5) Based on the Law on Insurance, the insurance business includes the following activities:
1. General insurance
General insurance is an insurance contract between the insured person and insurance company in which the payment of premium is made to insure the risks relating to property, liability and health. Hence, the types of general insurance products include property insurance, liability insurance and health insurance. (Article 23)
The Law on Insurance further explains that property insurance refers to an insurance contract that indemnifies the insured person when the property of the said insured person has been lost or damaged due to occurrence of the risk which has been insured. The claim amount paid by the insurance company to the insured person must not be more than the insured value as declared or stated in the insurance contract, except as otherwise agreed by the insurance company and the insured person. The products of property insurance may include insurance on building and ship.
Liability insurance refers to a contract which insures the amount of claim which the insured person is liable to pay to the third party who has suffered bodily injury or property damage caused by the conduct of the insured person or activity which is under the responsibility of the insured person. The products of liability insurance may include insurance on liability relating to vehicle, liability in building construction, and insurance on liability in transportation of passenger.
Health insurance is an insurance contract that pays for treatment of injury, sickness or other expenses, for example long term nursing care to the insured person who has suffered from the accident on body or sickness.
2. Life insurance
Life insurance is an insurance contract between insured person and insurance company in which the payment of insurance premium is to insure the death or survival, including insurance on personal accident, serious sickness or general sickness. The types on life insurance products include term insurance, whole life insurance, endowment and annuity. (Article 26)
Term insurance is one of the life insurance paid to the beneficiary upon the death of the insured person if the insured person dies within a period specified in the contract, for example 5 or 10 years, or before a specific age. If the insured person still survives after the specified period as mentioned in the policy, none of benefits is provided to the beneficiary of the policy.
Whole life insurance is another type of life insurance. It is an insurance contract which provides insurance on the death of the insured person. The premiums of this insurance can be paid for a specified period of years or for the whole life of the insured person. For whole life insurance, the amount of premium can be fixed at a specific amount and be paid each year in the same amount during the entire lifetime of the insured person. The insurance company must provide a monetary benefit to a deceased’s family or the designated beneficiary when the insured person dies.
Endowment insurance is a life insurance in which the benefit deriving from the insurance is provided to the insured person if he or she is still alive during the insured period as stated in the contract. If the insured person dies prior to the date as specified in the contract, the benefits must be provided to the beneficiary.
Annuity is an insurance contract that provides an income to the insured person for life after his or her retirement.
3. Reinsurance
Pursuant to Article 32 of the Law on Insurance, reinsurance is an operation of insurance in which the ceding insurance company is insured by another insurance company either fully or partially in respect of the risk accepted by the ceding insurance company in the insurance contract. In case of reinsurance, the ceding insurance company is still liable to the insured person.
4. Micro insurance
Micro insurance is an insurance contract which provides insurance to the low-income people, such as micro insurance which covers the property, life, and body injury. (Article 39)
Other than the insurance business to be conducted by the insurance company as mentioned above, the insurance business may include the business of insurance agent, insurance broker and insurance loss adjuster. (Article 46)
5. Insurance agent
Pursuant to Article 46 of the Law on Insurance, we note that an insurance agent can be either natural person or legal entity who represents the insurance company in introducing the sale of insurance, preparing insurance contract, collecting premiums and preparing indemnification according to the terms and conditions specified in contract between the insurance agent and insurance company. The insurance agent receives commission from the said insurance company.
6. Insurance broker
The Law on Insurance requires that an insurance broker be a legal entity working for the benefits of the insured person, providing consultation service and information relating to the types of insurance, terms and conditions and premiums of the insurance contract, negotiating and preparing the insurance contract to be executed by the applicant and the insurance company, and selling insurance policy by receiving a brokerage commission from the insurance company in the legal manner.
7. Insurance loss adjuster
An insurance loss adjuster is legal entity which is independent and has duties to inspect, verify and assess the damage upon the occurrence of risk and issue the assessment report of such damage which will be used by the insurance company as the basis to settle the claim. The insurance loss adjuster performs the duties by receiving fee from the insurance company according to their agreement.
In conclusion, insurance business in Cambodia includes business of general insurance, life insurance, reinsurance, micro insurance, insurance agent, insurance broker and insurance loss adjuster. We note that insurance business of general insurance, life insurance, micro insurance, insurance broker and insurance loss adjuster are performed by the legal entity while we also note that insurance agent business can be performed by either individual natural person or legal entity.
This text is not legal advice or opinion.