Georgian insurance market registers 14 insurance companies. There is sharp competition on the market and beneficiaries are able to enjoy various insurance services and products.
Currently, the 2016 financial indicators have not been specified yet, but Georgian insurance sector has finished January to September period in profits. According to statistics of Insurance Surveillance Office, the sector’s annual profits have extremely increased to 22.98 million GEL from 237.5 thousand GEL. Net profits in the last quarter rose by 10.5 million GEL. Net profits from nonlife insurance products made up 42.7 million GEL, while net profits from life insurance totaled 10.997,72 million GEL. In the same period, investment returns marked 11.4 million GEL, up from 3.7 million GEL of the same period of 2015.
As to expenditures, a major part of them (49.8 million GEL) was reflected in salaries, due payments and administrative costs. The sector’s assets account for 568.38 million GEL, liabilities marked 445.9 million GEL. Amount of generated insurance premium made up 316 299 291 GEL.
The Caucasus Business Week (CBW) has explored the 2016 insurance market tendencies and asked the private sector representatives and the field specialists to appraise the industry development aspects.
The year of 2016 was not exceptionally positive for insurance market. The industry problems have not been resolved and they still exist, Devi Khechinashvili, head of Insurance Association, noted.
It is necessary to bolster insurance industry even in 2017 by introduction of obligatory insurance component, Khechinashvili said.
“Obligatory insurance system is widely practiced all over the world as a mechanism for protection of people and state economies. Regretfully, Georgia has failed to regulate this issue. We hope the next year will bring certain changes in this respect. Insurance relations are developed through obligatory mechanisms worldwide. Many people have joined insurance relations, received benefits and insurance culture was shaped in this way stage by stage. We had similar samples in Georgia too. For example, state insurance programs have introduced optional insurance component. Number of citizens accustomed to purchasing private insurance products increased tenfold in several years”, Khechinashvili noted.
It is not clear what will be the result of efforts for separating private and universal insurance components. Government is still working on the issue and we expect these efforts to develop one of the important directions of insurance relations, Khechinashvili said.
“We are sure that the state budget of Georgia cannot provide every beneficiary with a required level for services. We expect the year of 2017 to bring breakthrough in health insurance and vehicle owners civil responsibility insurance directions.
TBC Bank has bought Kopenbur and this signifies TBC Group has entered insurance market. I welcome the major market player is interested in insurance sector. TBC Group is an influential body in Georgia and I believe it will promote the insurance business, Khechinashvili said.
Insurance Institute president Giorgi Gigolashvili has positively appraised the year of 2016 for Georgian insurance sector. Several important changes have taken place in Georgia’s insurance sector in 2016 and these changes will bring positive results in the future.
According to amendments to the law on insurance activities, a general meeting of stakeholders will be a supreme management body of the insurer. The general meeting of stakeholders is obliged to elect a supervisory board that will control the insurer’s activity. The supervisory board shall consist of at least 3 and no more than 21 members.
This body will control directors. The quantity of directors must be at least 3. The general meeting of stakeholders shall elect a member of the insurer’s supervisory board for a period of 4 years. At the same time, it is inadmissible to elect the same person repeatedly.
Commissions of directors shall be determined and separated by the insurer’s statute. One of the directors shall possess full management and representative authority.
So far insurance companies were founded as joint stock companies or limited liability societies. Organizations of these two legal formats were managed differently under the law on Entrepreneurship:
Namely, a LLC could be founded by one person and the founder could have full control over the company management. This signifies one person could fully manage the company and take individual decisions. This practice used to pose threat to rights of beneficiaries, Gigolashvili said and added that introduction of solvency margin was another positive change in insurance industry. Namely, on June 8, 2016 Parliament of Georgia adopted amendments to Georgian Law on Insurance Activities aimed at strengthening financial steadiness and solvency of insurance companies and admitting a supplier of duly organized and qualified financial services to the market.
The mentioned amendments represent the first stage of measures for undertaking and operation of insurance business for including requirements of EU and Council of Europe 2009/138/EC instructions of November 25, 2009 into Georgian legislation.
Financial steadiness and solvency of insurance companies is an inseparable part of stability of Georgian insurance market and this is a key guarantee for protection of consumer rights. This mechanism is to ensure higher financial steadiness of insurance companies, Gigolashvili said.
Several months earlier insurance companies were obliged to submit a business plan for obtaining a license, he said. “Determination of prices and so on were made superficially so far. That practice comprised high risks and today these risks have minimized”, Gigolashvili noted.
The year of 2016 has brought very positive results and benefits, PSP Insurance director general Vladimer Bezhashvili said and added that PSP Insurance revenues have increased by about 70% compared to 2015. In whole, the company has paid claims of about 25 million GEL and this is very impressive figure. As to non-financial indicators, the company has launched important projects in terms of service improvements. The company has introduced new electronic services that enable beneficiaries to more comfortably enjoy insurance services.
We have announced the year of 2017 as the year for improving electronic systems. This is the most important problem for our beneficiaries, because we operate in a corporate segment with deficient time. Therefore, PSP Insurance strategy for 2017 and other years is to load our services with electronic platforms.
As to industry, the situation is quite heavy. Financial indicators are unfavorable. Total portfolio of our beneficiaries have considerably increased. It is important to introduce mandatory insurance products. This is necessary and very important for our population.
Unison Insurance Company
Georgian insurance market was not enlarged in 2016, Unison insurance company director general Vasil Akhrakhadze noted and added that the sector’s profits have increased anyway because of two factors. «First, insurance companies with noncore businesses, which are affiliated companies in pharmacy or hospital segments. Their profits were generated from the mentioned segments. Second, difference between exchange rates. This year we had hyperinflation, which grew profits in GEL. This is a temporary effect, because nobody knows how difference between exchange rates will be changed and balanced», Vasil Akhrakhadze noted. Insurance companies had much more expectations from Government and the regulator in 2016. They thought that efficient steps would have been taken regarding employment of insurance mechanisms, he said.
“We expected more initiatives in terms of introduction of several mandatory insurance products that have been long practiced in the civilized world. Regretfully, this year the regulator could not emphasize and develop any mechanism, where insurance system instruments would be applied. I believe this is a very negative moment”, Akhrakhadze noted.
Georgia is a sole country in Europe and Post-Soviet space, in practice, that does not apply insurance mechanisms and this is nonsense, he added.
“When the Government does not use all these mechanisms, state budget funds are spent. All losses after natural disasters are compensated from the state budget, instead of insurance companies. Therefore, we should have mandatory insurance system in the country”, Akhrakhadze pointed out. As to Unison company, it does not own non-core profile businesses and operates only in insurance business and all profits are generated in insurance business, Akhrakhadze said.
Unison insurance company has comparatively improved positions in 2016. In certain components we are market leaders, including in aviation, responsibility insurance and so on, Akhrakhadze noted. As to 2017, the company will make focus on Internet sales. In the future Unison’s strategy will be oriented on minimizing barriers with beneficiaries. The company will intensify activities in this direction. Moreover, Unison company hopes that the new parliament will introduce mandatory insurance component in 2017, Akhrakhadze noted.