State-free insurance sector
30 January, 2014
State-free insurance sector
The insurance industry will cease to be funded by the state this year. Previously the state has provided healthcare for socially vulnerable people – the private sector stands to lose some GEL 300 million in guaranteed premiums. The State Fund of Overall Health Insurance will soon be in complete charge of medical insurance for socially vulnerable people, including children, pensioners, pedagogues, students and those who live below the poverty level. In 2010 the former government conceded this
to commercial industry, hoping to develop the sluggish insurance market, while providing regions with 100 new state-of-the-art hospital services.
As a consequence, health insurance became the leading insurance product - approximately 70% of the total insurance premium portfolio. The share of state financing also stood around 70%: in 2012, out of 2.4 million people holding health insurance packages, statistics show 1,775, 494 were state beneficiaries.
On the other hand, granting exclusive rights to insurance companies for both hospital management and health insurance deprived consumers of an option - that led to market monopolization, plus violation of consumers’ rights. Thus certain insurance companies enjoyed 60% of the profits in 2010. However, later the sector experienced serious losses due to the preponderance of state-funded healthcare.
As soon as the new government took office, it decided to take the insurance of socially vulnerable people from the private sector. The overall healthcare state insurance program began in February 2013 by offering a minimal package to all who were not already covered by corporate or state-supported social insurance programs. In July 2013 it introduced a basic package.
This year the change of hands will be completed: the State Fund will undertake healthcare insurance for Internally Displaced People and people below the poverty level starting in April; insurance pensioners and children under five will be eligible for the Fund in September.
Devi Khechinashvili, Head of the Association of Georgian Insurance Companies, fears that the market will be halved for private business. But Giorgi Gigolashvili, Head of Georgian Insurance Institute, approves of the changes. He believes this is a chance for the private sector to get rid of the distorted mechanism it adopted in 2010 and that hindered development of the sector. In fact, the sector faced more than 100% losses in 2013 – and the greater the portion of state-funded health insurance in the portfolio, the greater the loss.
Archimedes Global Georgia – which unlike other insurers handled healthcare only – had 116% losses in 2013, then went bankrupt early this year: GEL 67 million out of around GEL 68 million obtained by Archimedes was state funded. Others who had more balanced portfolios, with around 30-40% in healthcare products, survived, in spite of losses varying within 88-128%.
Gigolashvili believes the private sector still has a place in healthcare if they develop corporate packages, since state insurance covers only basic medical services, not medication. Meanwhile, it is no secret that 70% of healthcare expenses in Georgia are for medicine.
“Companies may offer the omitted services and develop other products like vehicle and property insurance. There are a million vehicles in Georgia, and only 50 thousand are insured,” he said; and insuring agriculture might be another option.

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