State Insurance Challenges Commercial Sector
21 February, 2013
State Insurance Challenges Commercial Sector
insurance system that is based both on state and commercial insuranceBy creation of State Insurance Fund, Georgia moves to the European

The to be created State Insurance Fund taking all the state-based health-insurance programs off the hands of insurance companies challenges the commercial sector to keep floating at the market. Sector pundits do not rule out that the insurance market may get more consolidated.
The overall state health insurance project initiated by new government and aimed to cover 2 million
people starting this February, throws down the gauntlet to the commercial sector as it deprives it off the guaranteed state-financing completely. Hence forth the State Fund of Overall Health Insurance will be in charge of medical insurance of socially vulnerable people including children, pensioners, pedagogues, students and those who live below the poverty level – all who enjoyed the state-financed health-insurance packages through insurance companies since 2010.
In 2010, the libertarian-economy-inclined ex-power decided to reform Georgian insurance system and hospital sector by handing the operation and administration functions to commercial industry completely. To this end, the state divided Georgian regions as separate lots, held the tender on obtaining the three-year exclusive right of hospitals construction-rehabilitation-management in each lot coupled with the exclusive right to be the health-insurance provider to the state-supported beneficiaries in the auctioned regions. By handing the state-insured people to the commercial sector the ex-authorities hoped to develop the sluggish insurance market on the one hand, and provide regions by 100 new state-of-the-art hospitals’ service.
As a consequence health insurance became the leading insurance product, making approximately 70% of total insurance premium portfolio. The share of the state-financing channel also stood around 70%: by data of 2012 out of 2.4 million people holding health insurance packages in Georgia 1.775 494 were the state-beneficiaries. On the other hand, granting exclusive rights to insurance companies on both hospital-management and health-insurance deprived consumers of the right to choose a provider that led to market monopolization, violation of consumers’ rights and corruption schemes thanks to which certain insurance companies enjoyed 60% of profit in 2010.
However, as the awareness of consumers increased the profit figure decreased that hardly might offset the burdensome investments of GEL 180 million made in construction of 100 new hospitals. Consequently, some companies went bankrupt and merged with more successful peers starting 2011. More market consolidation and mergers are expected now when insurance companies are cut out of the guaranteed 70% of the state-money injections as new government decided to adopt the mixed European health insurance model based on both state and commercial sectors alike.
According to the new system, the State Fund takes charge of the state-supported beneficiaries number of which enhances to 2 million in 2013. Initially the State Fund will provide them by minimal insurance package worth of GEL 5 per person [since February] securing just emergency medical aid and ambulance service. This package will transform to basic GEL 15 worth package starting July 1st that includes free childbirth service in addition. GEL 505 million will be spent on this kind of the state health insurance this year. More detailed information on the State Fund administration and insurance service mechanism will be disclosed later, government says.
What is completely clear at the moment is that the commercial sector needs to develop its creative skills to find a way out to reimburse the 70% loss in medical insurance financing that helped companies to balance the burdensome investments in hospital sector. Sector pundits recommend development of other insurance product specifically agriculture insurance that is so insignificant at the moment that companies cannot name its share in their product portfolio. Agriculture insurance seems promising after government made agriculture as a key priority starting this year and plans to invest hundreds of millions in this sector that cannot be done without proper insurance. Consultations have already started between the state and insurance sector to this end.
According to Giorgi Gigolashvili, Head of Georgian Insurance Institute, the change may be more afflicting to insurance companies that were focused on health-insurance alone. However, situation is not hopeless as the state takes over just insurance of the cheapest basic packages while the most demanded packages start from GEL 35-40 and going as high as GEL120-150 providing with bigger insurance limits, better service and broader choice of provider hospitals.
“Insurance companies may work on better quality service packages in health-insurance and be focused more on corporate insurance and go gradually on the underdeveloped private insurance too. They need to be more creative and attract consumers by high quality service,” Gigolashvili said.
He expects the market to become healthier as a result of the change that draws a clear line between the state and commercial insurances for the predecessor system [that made kind of addicts of insurance companies dependent on the state injections] was extremely sophisticated and confusing.
Tinatin Stambolishvili, Marketing Manager of GPI Holding, one of the leading insurance companies, expects the change to be less painful to GPI Holding as health insurance covers just around 30% of its portfolio and the company thinks of other products development, especially agriculture. However, Stambolishvili acknowledges that pay-back of the investments made in the hospital sector remains the key problem.
“We invested GEL 30 million in construction of 16 hospitals and our interests should not be overlooked,” she said.
Other Stories
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
Biblusi opens first shop for tourists - Georgian
The largest book shop in Georgia Biblusi opens the first shop specially designated to the needs and interests of tourists and named it Georgian.
Georgia improves by five ranks in the Prosperity Index
In the overall Prosperity Index rankings, Georgia has climbed by 5 positions from 85 to 80 when compared to last year. As such, Georgia is the best performing country in the CIS zone.
The future is bright for electric cars in Georgia
The numerous hybrid cars in the streets of Tbilisi cannot be overlooked. Entrepreneur Sulkhan Gvalia calls them “pagers”, referring to the predecessor of mobile phones.
Georgia’s fight against the big tiny enemy – Asian Parosana
It’s a tiny creature, but the harm it did to the Georgian agriculture sector was and still is immense.
New cable route: from Kobi to Gudauri in 15 minutes
On the 15th of December, cable transport is scheduled to be opened connecting Kobi and Gudauri.
Tourist boom in Gudauri – majority of hotels are booked by foreigners
Gudauri is among the most popular winter resorts in Georgia.
Medical tourism increases in Georgia
In the last 9 months, Georgia was visited by 19 500 foreigners for medical and recovery purposes.
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange