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Uninsured Trade and Business amid Frequent Conflagrations

Over the past 5 years several trade centers burnt down in Georgia. In most cases, property turned out uninsured. This factor generates huge problems. For many years, insurance sector specialists stress that there is no insurance culture in Georgia.

Insurance experts point out that the country does not provide satisfactory firefighting standards. On the other hand, the country lacks for a civilized form of insurance and a major part of sellers encounter the mentioned threats without insurance.

Insurance experts assert that Georgia, in practice, is an only country without any type of mandatory insurance policy. As a result, by government’s initiative, the Authorities have developed a bill for introducing  mandatory insurance of responsibility in public places. The bill has been already forwarded to the Parliament.

However, before the law adoption, new accident took place on July 2 – a part of three-floor building and several stores burnt down near Eliava Fair territory.

Here we publish a short list of trade facilities that burnt down over the past 5 years.

  1. Lilo Fair – on November 15, 2012 Lilo Fair territory burnt down. About 30 trade facilities were annihilated.
  2. Saba shopping mall – on February 26, 2013 about 5-7 thousand square meter space burnt down.
  3. Saneki Fair – on August 25, 2014 fire broke out on a 3 000 square meter territory and products and goods of about 250 sellers were annihilated.
  4. GIPSY Fair – on September 2014 the so-called Gipsy Fair burnt at Railway Station. As a result, 2 500 square meter space was annihilated.
  5. Khopa Fair – on December 7, 2014, the so-called Khopa Fair burnt in Batumi and two workers were injured.
  6. Eliava Fair – on December 27, 2014 a part of Eliava Fair was annihilated by fire.
  7. Isani Fair – on January 21, 2015 fifteen stores were annihilated by fire at Isani Fair.
  8. Eliava Fair – Paints storehouse was inflamed at Eliava Fair on August 4, 2015.
  9. Black Fair – Zestaponi Fair was almost entirely burnt down on August 2, 2016.
  10. Children World shopping mall – The fire covered the whole complex and the building entirely burnt down. Tens of sellers lost products and goods on January 29, 2017.

Over the past period, number of conflagration cases has increased. The Caucasus Business Week (CBW) has examined whether  property and reserves insurance segments were expanded in this period.

Aldagi insurance company

“Number of property and reserves insurance policy grows thanks to major business sector”, Aldagi insurance company director general Giorgi Baratashvili noted. Number of property insurance policies has increased by about 10% year on year thanks to major business sector, he said.

“Property insurance is one of the cheapest directions. For example, value of 10 000 GEL property insurance is only 200-300 GEL a year, about 8-10 GEL a month. Nobody will say this is expensive. Our problem consists in public mindset. Major business guessed that insurance is a key instrument for risk management. As to small business and individual entrepreneurs, there is low activity in this segment. The process cannot be enlivened without regulations. Europe and developed countries took these decisions 50 years ago. They also had problems, but they introduced mandatory insurance products to increase perception and coverage of insurance”, Baratashvili noted.

Aldagi director general talks about introduction of  mandatory insurance of responsibility for Public Places. Aldagi insurance company is participating in the working process, he noted.

It is important to prepare such a law, when insurance companies will develop  diversified portfolios that may be re-insured abroad, Baratashvili noted. “We should adopt laws that will enable to shift risks abroad”, Baratashvili said.

Introduction of property mandatory insurance will upgrade insurance culture in the country, he added.

ARDI Insurance Company

Property insurance segment has increased by about 5-10%, Mikheil Japaridze, ARDI insurance company business development director, noted. This is mechanical upturn. NO breakthrough has taken place in public mindset, he added.

Property mandatory insurance issues become relevant, when natural disasters and conflagrations break out. The time passes and a major part of entrepreneurs forgets about insurance issues, he said.

“For example, we can recall the case at SABA shopping mall on February 26, 2013. After this case, a part of sellers insured property, however, when the situation settled, they rejected insurance products”, Japaridze noted.

GPI Holding insurance company

There is comparatively different situation at GPI Holding insurance company.

Tina Stambolishvili, head of the company PR office, explains that GPI Holding introduced entrepreneurs insurance program in February 2017, after conflagration at Children World complex and offered 50% co-financing of property and reserves insurance policy.

As a result, number of applications in this segment has increased, Stambolishvili said.

«Lack of information creates key barriers among entrepreneurs. However, we try to make this service attractive for entrepreneurs through active communication. About 1000 entrepreneurs have joined the program since the program commencement», she said.

As to official statistics, Georgian insurance sector attracted 143.8 million GEL insurance premium in the first quarter of 2017, up 13.2 million GEL as compared to the same period of 2016.

According to statistics of Insurance Supervision Service, in the attracted insurance premium, a major part is recorded for medical insurance – 84.46 million GEL. Land transport insurance is second with 23.70 million GEL, property insurance is third with 12.42 million GEL, life insurance is fourth with 6.88 million GEL, civil responsibility insurance is fifth with 3.95 million GEL.

As of the first quarter of 2017, fifteen insurance companies are registered on Georgian  insurance market, of which 14 ones own life and nonlife insurance licenses and one of them holds nonlife insurance license.

Insurance Association of Georgia

Devi Khechinashvili, head of Insurance Association of Georgia, noted that number of applications for property and reserves insurance has not increased. «A statement of one of the sellers was spread – I had not insured property, because I did not know fire would break out». This is mindset. That’s why the Government plans to introduce mandatory insurance, because they know insurance does not exist in traditions, culture and business process of people», Khechinashvili said.

Giorgi Gigolashvili, President of Insurance Institute

In previous cases, no seller had insurance policy, but now 57% of sellers, 17 of 30 ones, had insurance policy, he said.

Giorgi Gigolashvili stressed necessity of introduction of mandatory insurance component. Low penetration  is the result of inactive character of human thought rather than a lack of information, Giorgi Gigolashvili said.