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Georgian Insurance Companies Fail to Increase their Capitalization

An interview with the Head of the Insurance Supervision  Service Lasha Nikoladze

The introduction of compulsory motor insurance is planned in 2015. What regulations are scheduled to be introduced and at what stage is the work on the law? What should  both  community  and insurance companies expect from it?

As it is known, mandatory car insurance is valid in Europe for 60 years, and besides, it operates almost in all countries of the former Soviet Union. The introduction of this service in Georgia is one of the commitments made by the country  under the Association Agreement with the EU. Furthermore, mandatory car insurance is part of the social policy of the government.

Adoption of the law on compulsory motor insurance is planned to be introduced  in early 2015, and currently work is underway in both legal and technical issues. From the point of view of the legal framework, work is almost completed.  With regard to the insurance premium,  currently experts are carrying out calculations taking  into account the statistical data, the quality of life of the population, and some other factors. Several schemes will be developed, which then are to be considered in Parliament.

It should also be noted that in addition to life and health insurance during a car accident, property issues will be settled as well.

With this law, all the victims in auto accidents will be provided with  life and health insurance as well as property insurance.

According to data for the 2nd quarter of 2014, total assets of the insurance business amounted to GEL 522 million. It is not very much. What factors hinder the further development of the insurance industry?

Despite the relatively high insurance premiums, the companies  cannot increase their capitalization and this is mainly due to improper planning. Moreover, several companies have disappeared from the market.

Another very important fact is that for many years the state did not pay due attention to the insurance business, both in terms of correct guidance and promotion. If we compare this sector with the banking system, it can be seen that through proper regulation, banks’ development is much higher. Accordingly, today, we have to take steps that should have been done many years ago in order to prevent the transformation of the insurance industry into an outsider.

However, despite this, it should be noted that the market has undergone a  very serious way in building a culture of insurance and its popularization. In particular, the importance of the insurance has increased significantly as well as the awareness of  companies and their services. While, of course, at this stage the Georgian insurance companies cannot yet reach the level of European stability and risk management.

What are the main tasks of the monitoring service?

Our main task is to create an investment climate that will make the sector attractive for both domestic and foreign capital – that is, the development and implementation of European standards, implementation of corporate governance principles, the introduction of compulsory motor insurance.

Against the background of the signing of the agreement with the EU, we are preparing a variety of regulations, the implementation of which will create the conditions for the expansion of the insurance business. Ultimately, our main task is to provide beneficiaries with high-quality services for an adequate price.

In what direction should the insurance industry be developed in order consumers to have more confidence?

First of all, the insurance sector should explore more fundamentally basic needs in the Georgian market. Based on them, it  will be possible to offer  more transparent and reliable contracts, which in turn will increase trust – namely, the confidence of the population is a basic condition for the development of the insurance business.

All insurance companies must ensure the quality of services; avoid any kind of negligence and inattention to the needs of customers. They must offer quality insurance products for adequate cost. They need to understand that poor services harm specific companies and insurance sector as a whole.

The health system is particularly important and insurance plays a special role. Health services should be improved  constantly, there  should be a permanent growth  in this area, and along with it  an  increase in the availability of insurance services.