GEL Devaluation has Increased Private Insurance Costs by Over 30%

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The FINANCIAL — Private insurance companies have increased the prices of their insurance services by over 30% recently. Health insurance appears to have been the most affected by the devaluation of the GEL, showing the largest price hikes. Representatives of private insurance companies consider the implementation of mandatory insurance to be the main thing required for the further development of this sector.

“Devaluation of the national currency has increased the cost of health insurance by 40-45%,” said Ekaterine Khidasheli, Marketing Manager at ARDI Group. “The growth in prices of medicines, ambulatory and hospital services has contributed to the cost of our service,” she explained.

According to Khidasheli, health insurance has suffered the most in regard to the increased costs.

IRAO, member of VIG, has increased prices of insurance products by 15-20% compared to the previous year. Like Khidasheli, Nana Shonia, from IRAO, said that the price increase has mostly affected health insurance products. “Many of the components of the product pricing of this service are in direct correlation to the exchange rate.”

“The annual inflation rate, as well as devaluation process, has contributed to the trend of increasing prices of medical services in the country and accordingly, corporate insurance services,” said Shonia.

“Increased prices of pharmaceutical products and medical services have had a negative impact on the rate of loss. Accordingly, this has been reflected in our company and throughout the whole of the insurance sector,” Shonia added.

As Tinatin Stambolishvili, ‎Head of Marketing Communications at GPI Holding, said, in total the cost of insurance services has not increased significantly. However, she didn’t provide exact figures.

“In general, devaluation impacts on the solvency of the population. People start saving on secondary consumption items. This trend negatively influences the retail segment of the insurance market; the corporate segment less so. We did not have a significant drop in our company. However, in general the growth rate of the insurance market reduced in 2015, in comparison with 2014,” said Stambolishvili.

Overall, 2015 has been quite a difficult year for the Georgian insurance market. “2015 has not been easy for the sector as a whole. It was quite a difficult year for our company. Average growth of the company was 10-12%, in comparison with 2014. Compensated loss has increased more, particularly in terms of health insurance,” said Khidasheli.

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Written premiums in both the retail and corporate segment at IRAO have shown 3% growth in 2015, in comparison with the prior year. As for auto insurance, the company has seen 13% growth.

“As for the amount of active policies, in both the retail and corporate segments, their total amount decreased slightly compared to last year,” said Shonia, IRAO.

Contrary to ARDI and IRAO, Stambolishvili, GPI Holding, estimated 2015 to be another successful year for the company. “It has been shown in the attracted written premium and increased number of retail and corporate policyholders. Last year we implemented several important projects. The company launched the online application of auto insurance compensation. It made the process more simple, rapid and comfortable for insurers. Another innovative project was the social project of natural disaster insurance. Since Tbilisi’s flooding on 13 June, 2015, we started offering this service to all auto holders. Thousands of car holders have used this service. Considering the importance of this service we will continue to offer it in 2016.”

“In 2015 GPI Holding compensated the largest loss in the history of Georgian insurance. We compensated over GEL 4 million for the company GeoSteel, in just the one case,” said Stambolishvili.

Representatives of the Georgian insurance market hope that 2016 will be better than 2015. Meanwhile, further development of the sector is strongly linked to the implementation of mandatory insurance services in the country.

“2016 will have certain challenges. However, we hope that it will be better than 2015. The exchange rate of the national currency still remains one of the main challenges of the current year. We hope that there will be more intensified work towards implementing compulsory insurance types,” said Khidasheli, ARDI.

Like Khidasheli, Shonia from IRAO believes in the prospect of the introduction of mandatory insurance. “It will directly contribute to the development of the insurance market in Georgia and make the population more secure.”

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“In 2016 we expect scheduled reforms in the insurance sector will be implemented faster. This is important not only for the development of the sector, but for the improvement of general social conditions in the country. By this, I mean implementation of a mandatory policy of auto insurance which is equal to European standards,” said Stambolishvili, GPI Holding.

According to Stambolishvili, low awareness of insurance still remains one of the main challenges for our industry. “We will do much more in this direction in order to switch more people and companies to insurance services. In this way we will create strong financial and social guarantees for unpredictable conditions.”

Georgian private insurance companies do not think that the increased prices will reduce the number of insurers, which has already seen an impact due to universal health insurance.

“Universal healthcare is radically different in its essence from private insurance. Private insurance compensates such services that cannot be included in state projects. Despite the recent price growth the cost of insurance services at private companies is far from the level which is useful for the development of this industry. Currently, we spend five times more on cigarettes in Georgia than on health insurance. The average monthly premium per each policyholder is GEL 26. This is a really low figure,” said Khidasheli, ARDI Group.

“We do not consider universal insurance to be our competitor. Private insurance offers services that are more comfortable and attractive. We managed not only to maintain but increase the segment which prefers quality. For the insurers of state insurance we launched a special product which includes additional services for them, like increased limit, medicines, high technological research and wider range of hospitals,” Stambolishvili said.

“Against the background of the existing challenges, maintaining the current rate of growth and development of the company is the main task ahead of us, for the whole of the industry as well as for our company. Maintaining this pace will be directly reflected in the quality of operations of insurance businesses and service offered to customers,” Shonia, IRAO, told The FINANCIAL.

 

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