Paying for a new car in full used to be a strict requirement for Laotians, but now owning a car here has become easier.
The recent easing of restrictions is expected to boost car sales in Laos, and the region’s insurers are preparing to take advantage.
It was just a few years ago that a hire purchase system was introduced in Laos, letting consumers put down 30% of a car's value and clear the rest through instalments.
No doubt the change will give a boost to car sales and result in heavy traffic in this landlocked country, especially in the capital, Vientiane.
While some observers are concerned that busy transport may lead to more road accidents, insurance industry leaders appreciate how strong car sales could eventually benefit their business.
"By law, all types of vehicles in Laos must have insurance coverage," said Phaignaek Thammanam, head of marketing at Allianz General Laos.
AGL's business grew by 40% last year with the onset of hire purchase.
Though the actual number of new cars sold in the country is not officially reported, AGL expects the hire purchase method to fuel sales of 600 units a week.
According to Mr Phaignaek, Laos has about 2.5 million registered vehicles including motorcycles, but not all have insurance coverage despite the legal requirement. Some 40% of vehicles are insured.
AGL's research found several barriers preventing consumers from accessing insurance: social and cultural obstacles, a limited understanding of the insurance business and a lack of awareness of the need for risk management.
Phaignaek: Just 40% of vehicles insured
But other promising factors have attracted foreign investors to Laos, such as annual economic growth of 7-8% the past several years.
The country's entry into the World Trade Organization on Feb 2 this year could spur further investment in this small country of about 6.5 million.
Mr Phaignaek said the government also promoted the insurance business by amending a 1990 law after 20 years.
One condition requires all businesses in Laos, including foreign investors, to buy insurance from established insurers in the country.
Six companies now have non-life insurance business in Laos: AGL, Toko Assurance Laos, Lao-Viet Insurance, MSIG Laos, PCT Asia Insurance and Lan Chang Insurance.
AGL set foot here in 1990 as a joint venture between the Finance Ministry of Laos (49% ownership) and Germany's Allianz (51%). It claims a market share of 75%-80% in non-life insurance, with clients like Hongsa Power Plant, Beer Lao and Tiger Beer.
The other companies are fairly new players in the last five years or so.
AGL last year took in about US$20 million in premium revenue, 60% of which was from motor insurance. Most clients are in Vientiane, home to 70% of the country's motor vehicles.
Laos shares a 1,835-kilometre border with Thailand, and there are several convenient crossings between the two countries. The most popular is the Friendship Bridge between Nong Khai and Vientiane provinces.
Since Thai motorists are obliged to buy insurance from Laos if they wish to drive in the country, AGL has had a partnership with Thailand's non-life insurance leader, Viriyah Insurance, for over a decade.
"Police at the border checkpoint will inspect whether cars from Thailand are insured or not. The inspection prompts brisk business of insurance in the area," said Nattapong Boonyen, an assistant manager in the region for Viriyah.
Traffic confusion causes many road accidents because Laos drives on the right and Thailand on the left.
Mr Nattapong said cooperation between AGL and Viriyah helps manage the problem.
The two parties recently agreed to let agents from Viriyah sell insurance for AGL in Thailand. Thai agents get training from AGL and a better grasp of traffic rules and legal procedure in Laos.
Many motorists buy cheap policies with low coverage that may not match the needs of the claimant. The Thai Embassy in Laos recently told Thai motorists to buy insurance with greater coverage to deal with unexpected claims.
Last year, cross-border insurance between AGL and Viriyah totalled 1,200 policies worth 1.8 million baht _ a small amount compared with the more than 25 billion baht in premiums Viriyah earned from motor insurance last year.