BUSINESS
Focus on insurance cultivation
21 April, 2011

Lack of insurance culture enables Georgian insurance companies to enjoy unbelievably high profit margin - this is the key message sent by Public Insurance project implemented by Georgian Insurance Institute (GII), a non-governmental watchdog, for the last 6 months.
GII that has been closely monitoring the insurance market with the purpose to increase public awareness of insurances issues and protect rights of insured people and work out a package of recommendations to this end summarized results

of the first phase of the monitoring. To reach its target groups mainly participants of the state-supported insurance programs GII regularly has been in touch with the public through media and hot-line service. GII consultants visited regions to research how things have been developing there and consulted about 700 people out of whom 36% were teachers and 43%  were socially vulnerable.
According to Giorgi Gigolashvili, Head of Georgian Insurance Institute, bigger problems were related with the health-insurance of the state supported programs. Health insurance makes the biggest portion of the insurance market as far as it embraces 1. 5million clients and million out of it is a part of state programs focused on teachers and socially vulnerable people.
“The key problems of the people are low level of awareness, non-transparency of insurance companies, and inadequate quality of the insurance product, also lack of option,” Gigolasjvili told Georgian Journal.  “Corporate clients are more experienced and well-aware of their rights and ways how to behave with insurance companies, while the bigger part of the state-insured clients is ignorant of their rights and service level. Some just do not know that they are insured and cannot understand the meaning of the police paper they own.”
This ignorance is the reason insurance companies enjoyed unbelievably high profit margin thanks to the state health insurance in 2008-2010, as Chamber of Control of Georgia disclosed this year. In 2010 Georgian government on purpose to make health insurance available to socially vulnerable people throughout Georgia, divided regions in 26 parts, held a tender and gave each lot to winner insurance companies for 3 years. Insured people of each lot cannot change provider insurance company that leads to violation of clients’ rights and discontent. Insurance companies are responsible to provide clients with detailed information on their rights and service products, but they do not.
Georgian analysts think that the sooner insurance companies realize that contended client equals guaranteed profit the better.
“Insurance culture is on low level in Georgia, the insurance companies and institutions are just fledgling, and we face a transitional phase that is always full of problems. Our problems are lack of information and quality of product that causes discontent.  Insurance companies must realize that the more contented client they have this is a precondition of attraction more clients in future. Secondly against the backdrop of small market and high competition like ours, if they do not provide client by adequate and qualified product they will lose client,” Davit Narmania, Executive Director of the Center for Economic Problems Research, said.
According to him, our insurance market differs from others by dominance of the state-insured people that “spoils” insurance companies by high profit margin that could not be available against the backdrop of free market competition. Narmania recommends non-governmental watch-dogs not to loosen control over the insurance system so as to develop insurance culture in Georgia.

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