Supervision of Georgian insurance sector will be separated from the National Bank of Georgia soon and an independent Georgian Insurance State Supervisory Service, a public law entity will be set up. The law on commercial banks has already been amended to this end but works on creation of the independent supervisory body will enter the active phase starting April 15, 2013.
According to Giorgi Gigolashvili, head of Georgian Insurance Institute, the new supervisory service will have a supervisory council that will hold meetings from time to time but neither the names of the chairperson of the council nor the tentative intervals of the council meetings are disclosed as of yet. Davit Onoprishvili, Head of the Finance and Budget Committee at parliament, was the initiator to separate supervisory body of the insurance industry from the National Bank of Georgia (NBG) for the NBG fails to implement insurance sector supervision properly. According to Onoporishvili, insurance sector faced problems after its supervisory service operating independently was merged with the NBG. As a matter of fact Georgian Insurance State Supervisory Service had been operating as an independent body since 1997. In 2007 it incorporated supervisory body of securities market and in 2008 all was handed to the NBG for supervision and regulation. Actually the insurance sector faced for the second consecutive years in 2012 while before the sector has been only growing. Problems in insurance started after it took over the state-based health-care insurance beneficiaries in 2010 and implemented big investments in hospital sector rehabilitation and construction throughout country under the state crack-down again. Insurance companies were responsible for both operation/management of the hospitals and health-care insurance package provisions that led to boosting monopolists at the market infringing interest of clients. The most affected were the state-insured groups of vulnerable for companies under the state pressure agreed to provide them by unreasonable health-care packages falling below the market price. As a result insurance companies tried to elude some services envisaged by packages that frustrated their clients. On the other hand, insurance business got addicted to the guaranteed state financing of the health-care programs other insurance products like agro-insurance, insurance of responsibilities of the third person were ignored and the health-insurance cut around 70% of the market share. Gigolashvili believes all the defects of the insurance sector and the flaws in the service they provided was a result of improper supervision and now the new supervisory body should be granted by high level of independence and staffed by professionals to de-monopolize the market first of all and then carry out counter-measurements to boost development of the now overlooked products.
“At the moment the state pays if the weather affects the agriculture while the entire world has developed agriculture risks insurance to this end. On the other hand we have for example no insurance of the vehicle transport drivers’ responsibilities against the third person which means reimbursement of losses to the third party if in a car incident a driver cannot cover the loss to the injured person or the state if it damaged some state property. Meantime there are around 850 thousand vehicles in Georgia and the risks they bear must be insured,” Gigolashvili told Georgian Journal.
According to Devi Khechinashvili, the NBG that had been focused on banks mainly, has no competence to supervise by insurance that is a completely different business and cancelation of independent supervisory body was a mistake. He finds that new elaboration of proper legislation is necessary; however, Khechinashvili regrets that government introduces restoration of supervisory service in insurance sector without due consultation with the business itself and its sector pundits.