BUSINESS
Civil responsibility insurance to be mandatory
08 May, 2014
Civil responsibility insurance or insuring responsibility of vehicle owners against a third person in case of an accident will become mandatory in Georgia. The Georgian authorities already addressed the issue and civil responsibility insurance is expected to enter into force by 2015. While insurance of the vehicle owners’ responsibility against third persons has been successfully implemented in developed European countries for over 50 years, Georgia remains the only European country which still lacks this obligation. As a matter of fact,
Georgia is the sole country without this civil responsibility insurance within the entire post-soviet space. Only a couple of underdeveloped African countries have this insurance gap, sector pundits say and it is a shame to remain in this way any longer while the statistics of accidents reached its peak in 2013: 5510 accidents were registered last year which led to losses for 8245 people and 514 were injured. But statistics are silent of how much was spent on reimbursing those losses and injury related expenses. Most probably, they all covered their losses and expenses based on personal deals and own budgets. There are roughly 900 000 vehicles registered in Georgia and only 30 000 are insured. In other words, 870 000 or 96.6% are vulnerable to accident related losses and outlays.
Georgia did not lack this responsibility before. This kind of civil responsibility insurance was mandatory in the country from 1997 to 2004. But it was halted in 2004 because this insurance was tied to the technical inspection of vehicles and part of sector pundits found this unfair. As a result, the risk of accidents increased. To handle this issue and fill the gap the Georgian government is currently engaged in a project to make the civil responsibility insurance obligatory in the country. It means that in case of an accident the reimbursement of any material/financial losses and medical service expenses will be covered by insurance companies. This is part of obligations assumed by Georgia in the frames of the Association Agreement with the EU initialed by Georgia last fall and scheduled to be signed this June.
According to Lasha Nikoladze, Head of the Insurance State Supervisory Service of Georgia, the insurance sector’s regulatory body, tariffs for the obligatory civil insurance are currently being calculated and works very likely will come through by this fall. All the licensed insurance companies will be able to sell this product. He cannot specify the exact date when this insurance product will become obligatory, but probably next year. Giorgi Gigolashvili, Head of the Georgian Insurance Institute, hopes that the said tariffs will be reasonable and the obligatory civil responsibility insurance will increase the competition on the market.
Tinatin Stambolishvili, Head of Marketing Communications at the GPI Holding insurance company, believes that once the civil responsibility becomes mandatory it will provide a huge stimulus to the market to develop this product. At the moment, according to the latest statistics, the civil responsibility insurance makes up just 1.78% of the total Georgian insurance portfolio which includes around 38.6 000 insured people and slightly over GEL 8 million of premiums attracted through this product.
“This third party insurance will become obligatory, not because companies are intent of this but because the state wants this. There are a lot of people who are injured in accidents and cannot get adequate help and compensations with either health or property related expenses,” she said. “It will provide a big stimulus to the market; everywhere the obligatory civil responsibility was adopted it gave a huge impetus.”

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