Insurance Sector Losses and State Monopolist
18 April, 2013
Georgian insurance sector faced losses for the second consecutive year but more seems in store because the state very likely will become the monopolist on the health-insurance market.
While the state is taking over the overall health-insurance system at its hand the insurance sector is puzzled how to survive without the health-insurance that used to be a drive force of Georgian insurance sector. As a matter of fact insurance sector had GEL 7.2 million losses in 2012 and the piling
claims filed by discontented provider clinics at the insurance mediation service are growing. If during the entire 2012 year around 42 claims were filed totally now there are already 32 claims registered in the first quarter of 2013 alone and bigger part of it comes on unpaid debts of insurance companies to clinics. Sector pundits believe the large portion of health-insurance making around 70% in the total insurance portfolio and involvement in hospital sector construction/management led the sector to losses. According to Devi Khechinashvili, Head of Association of Georgian Insurance Companies, the lion’s share in the losses comes on Alfa and Archimedes Global Georgia both providing with health-insurance service only.
And much more troubles loom in prospect to the insurance business sector for the state setting up the State Insurance Fund in this past February will apparently become the health-insurance market monopolist gradually dictating the price-making policy that the private sector can hardly compete. The State Insurance Fund provides by minimal insurance packages at the moment but since July it will provide people by basic package. Details of this basic package are not disclosed as of yet but Khechinashvili presumes that it may kill the corporate insurance for companies will find insuring their employees as redundant expenses.
“If this basic package will be good enough corporations will stop insuring their employees for this will be not a social responsibility but a luxury. Why are companies supposed to insure their employees if the state will insure them?” Khechinashvili elaborates. As an aftermath the corporate health-insurance may disappear altogether leaving the sector without the drive force the health-insurance used to be. Ultimately the state will be a monopolist on procurement provider clinics’ service too that may affect the hospitals development and create problems for insurance companies to get the GEL 180 million investments made in hospitals development paid-back.
The point is that in 2010 insurance sector took over the state-based health-care insurance beneficiaries for much below the market price under the state crack-down. To offset the loss the ex-power vested companies with the construction and operation rights of hospitals in regions plus granted by exclusive insurance provider positions in their hospitals adjacent districts that deprived clients of the choice and made insurance companies monopolists in both insurance and medical service provider market. Creation of the state Fund destroys this vicious circle depriving the private insurance to lead the health insurance. Moreover, this year the hospitals management right expires and insurance companies really have to figure out how they will get their investments put in the hospitals back. But since the state insurance policy is not completely outlined insurance sector remains uncertain of the future. Economic analysts do not rule out the health-insurance-oriented companies to go bankrupt.