Why is the Insurance Companies’ Profit Falling?

 

Net profit of Georgian insurance companies amounted to GEL 13.5 million in the past 9 months of 2017 which is 1,7 times less than in the same period in 2016 that has become the trend of recent years.

And this happens amid  increased  volume of premiums – in  the three quarters of 2017 this figure was GEL 345.7 million, while in the same period of 2016 – GEL 316.3 million. In other words, the profits of insurance companies should  grow along with the growth of premiums, but the opposite happens that can be explained by  the increased  expenses of the insurance business.

According to the head of the Insurance Association Devi Khechinashvili, figures on specific companies are more important than the total  sector’s profit.

"The main thing is the financial indicators of individual companies. One can see a big profit, but another can suffer a loss. But in general, the insurance business is unprofitable," he says.

In Khechinashvili’s words, the reason for this is that the expenses of insurance companies have grown and profits  have remained unchanged first of all in the  health insurance. 

 "The number of those who enjoy insurance services does not grow, business does not develop because  private and state insurance cannot be synchronized. The situation is complicated  by  inflation  because of which the cost of medical services is constantly growing, "Davi Khechinashvili explains.

He notes that the government recognizes it adopted unilateral decisions within the universal healthcare program and did not synchronize it with the private sector.

"Insurance relations should develop. The government realizes  that unilateral decisions have been adopted, and now legislative changes are needed, " the head of the Association explains.

“Parliament is considering the issue of compulsory insurance of foreign cars, and innovations in terms of public security are also planned. We hope that by 2018 the insurance industry will adapt to the changes and we’ll achieve synchronization of the private sector with the state, " Khechinashvili notes.

At present, 16 insurance companies are registered in Georgia, the main service on the country's insurance market is health care, other services, including auto insurance, are very poorly developed.

Only 5% of the auto fleet are  insured in the country.