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Advanced Insurance System can be an Alternative to the Banks

An interview with the former head of the Insurance Supervision Service Lasha Nikoladze

Today many talk about the need for some types of compulsory insurance – for example, vehicle insurance. However, the ongoing process was put on hold and gives the impression that the government does not risk to make unpopular decisions.  How in this case the country shouldintroduce at least a few types of compulsory insurance?

It is necessarily to act right now. The first step  is a compulsory insurance of vehicles with foreign numbers arriving in Georgia. But it will solve only part of the problem, compulsory insurance must apply to   local citizens as well.

Whether it will harm  tourism business?

There are  misperceptions  in our country about  tourism – such as the fact that if people who arrive in  Georgia by  car pay  $ 40-50 on the border, it will scare them. But I do not know any country, including neighboring, where there is no compulsory insurance of the cars arriving from overseas.

All the tourists have to buy insurance as to drive a car, especially in a foreign country is  a considerable risk, which must be balanced. If a foreigner gets into a car accident in Georgia, it will be primarily a problem for him.

It is, as you said, the first step. What should be done then? And in addition to auto insurance, what kind of insurance can be made compulsory?

All over the world types of professional insurance are very popular, so in Georgia compulsory insurance should be introduced on certain types of professions. For example, doctors, and it’s not just about doctors themselves, but also about the clinics as a whole, which should insure against many surprises – to take at least elementary infection.

Such insurance can improve the quality of medicine, as in this situation, all the rules and procedures in clinics will be more tightly controlled.

What can be the role of the insurance business in the emergence of alternative financial market?

Insurers have a lot of different functions and  the issue of low-interest and long-term loans is  one of them.

We perceive insurance only as a way to compensate for the loss. And  we have to look from the other side – for example, the pension funds, which are a direct alternative to banks which  allow citizens to place their savings – whereas today only banks are engaged in this.

The population has  very limited opportunities to invest their money. Insurance companies can give people the opportunity to diversify their savings and money accumulation.

The insurance companies have another advantage – banks open deposits for a certain period, after which they must be opened again under other conditions. Pension contributions have no such restrictions. Interest on money put in the pension fund can be taken at any time, and can be kept untouched until old age.

How promising is the development of Georgia’s insurance market under  this scheme? What does it depend on?

Demand for insurance services arises from the economic situation, and depends on the development of the middle class – we are talking about sustainable middle class, who can afford to think not only about today  but  and about the prospects.

Insurance business develops only with the growth of the middle class, because the poor do not have the possibility to use the services of the insurance company as investment savings – they simply do not have such savings.

The rich also don’t need this, since their investments are so diversified that they have no need to invest somewhere else.

In a poor country, the bulk of the population only need health insurance. Now Georgia’s acting state universal insurance, it is of course very imperfect, and does not cover many of the services, but the citizens have the opportunity to use the services of insurance.

In a poor country, the bulk of the population uses only health insurance. In  Georgia the universal health insurance is enacted, it is of course very imperfect and does not cover many of the services, but the citizens have the opportunity to use the services of insurance.

Based on the foregoing, to introduce a compulsory motor insurance is also too early because of the social status of citizens. Is the country prepared for  the compulsory motor insurance?

In a poor country auto insurance is more important than in wealthy countries.

If compulsory insurance is a form of social protection, then why it has not been yet introduced in our country? Maybe it’s due to the fact that in Georgia the word “compulsory” already causes dissatisfaction?

Of course, it is unpleasant when a person is forced to do something against his will, but the attitude will change if all the benefits that can be obtained for a small fee are properly explained. People will begin to understand that mandatory insurance will save them from many risks. Now a political will is needed. But it must be done as  the compulsory insurance enhances the culture of insurance in the country, and this in turn leads to growth in other areas of insurance.