Unison: it is impossible to develop a successful modern country without a strong insurance sector
How would you evaluate 2014/15 for Unison?Year 2014/15 turned to be a turning point for Unison. Great changes on the financial market, as well as at the legislative level, took place. However, we managed to strengthen our positions on the corporate andretail levels. We entered several new projects like Agro- insurance project, which was carried out by the Agriculture Projects Management Agency through Ministry of Agriculture initiative; entered retail market with innovative products and services; made first steps in the e-commerce development in the insurance mar-ket and launched functional mobile service application and online sales.
In 2014 we ranked third among the insurance companies in Georgia with a 15% share of the market where we advanced from 8th place previous year. We are among the leaders in the non-health market,and particularly prominent in property insurance. It was a year of our success.
What products do you offer to your customers?
We offer almost all Insurance products existing currently on the market except pension funds. For individual insurance we cover Motor Vehicle,Travel, Property and Agro Insurance, for corporate segment we offer very competitive Health Insurance products, Contract and Customs Bonds, Cargo, Property, Liability, and Motor Transport Insurance products.
What are the repercussions of the current financial and economic situation in Georgia on the development of the insurance sector?
It is known that the insurance market worldwide is one of the sectors most depended on the economic growth. According to official data (geostat.ge) Georgia’s economic
growth indicators for 2014 I&II quarters showed up 7.1 and 5.2 respectively whereas in 2015 we have 3.2 and 2.1 for the same periods.
This of course affects the market much and it is hard to believe that we have managed to show even
growth of the sector.
What was the growth of the insurance industry in Georgia in 2014/15 and how insurance companies are developing?
In 2015 IIQ according to official data the market volume totaled 208,293,574GEL with the indicated growth of 18% compared to the same period in the previous year. Significant growth was noted in life insurance - 71%, where the Unison portfolio followed by 52% growth, in health insurance market growth was very insignificant indicating 5.6%. The abovementioned was caused mainly due to the ongoing Universal Healthcare State Program, though beyond that the Company showed 62% growth of its corporate health insurance portfolio. 42%growth is shown in motor transport,
24% in Property and 21% in liability insurance. Negative growth trends are indicated in cargo insurance-38%.
The reinsurance premium was increased significantly in the 2015 IIQ, one of the main reasons of which is the poor macroeconomic situation in Georgia and throughout the region. All the big projects are reinsured and the capital goes out of the country. The insurance companies operate on small profit, so it’s hard to take and maintain high risks. This is a losing strategy in the long run, as long as more money flows out, then it’s imported in the country.
How many insurance companies are currently at Georgian market, what’s the market share and where does the Unison stand?
Currently in Georgia exist 14 insurance companies with the market share for II quarter 2015 as follows:
Here should be noted that the daughter companies of the largest bank “Bank of Georgia” IMEDI L and ALDAGI hold 39% of insurance market share; Vienna Insurance Group is represented by two companies - GPIH 18% and IRA O 6% share and next comes the UNISON,pure insurer , with 8% of market share for the moment.
How does the current legislation regulate investment policy for the insurance companies in Georgia?
The insurance legislative policy is still at very poor level in Georgia. Unfortunately the government could not manage to pay significant attention to the sector, which is extremely regrettable, because it is impossible to develop a successful modern country without a strong insurance sector.
The absence of compulsory insurance types is one of the key obstacles for the investors either. There is no compulsory insurance of any kind yet though certain promises are made from the government side about acceptance of MTPL compulsory insurance. This question is crucial, because under the current economic situation it is important to have some fields on which insurance companies can rest and have opportunity for stable development.
A terrible but a clear example of the descent need of the developed insurance sector was a recent tragic flood event that occurred in Tbilisi in June 2015, where the total damage reached 200 MLN GEL out of which very small portion 4.2 MLN was insured and where the insurance companies compensated almost 100% of the damage in the shortest periods of time. The rest needs to be compensated by the government, which is not the right way to do as the government should not be responsible to compensate such losses like the case in developed countries. It is the insurance sector which should be in charge of it. It needs to be mentioned that Georgia as a part of Caucasus is located in a highly seismic zone and the natural disasters are most likely to occur causing far more severe damages and losses than this, and it would be quite difficult for the government to compensate.Some preliminary steps were made by the government to raise insurance culture among citizens and minimize related expenses, like Agro- insurance project. In the beginning the government subsidized 90% of this project whic h later was cut down to 70% of insurance premium and the rest 30% was left to be paid by the farmers. The fact is though that even under such a favorable term the budget of the project (10 MLN GEL) w as not utilized.
The weakness of insurance market legislative base is more crucial because the Georgian insurance market is not protected from the interference of other more developed and strong sector influences like from banking, pharmacy, and hospital management sectors. We have some examples of bank owned, pharmacy chain owned and hospital affiliated insurance companies. Good example of it is the biggest bank in Georgia “Bank of Georgia” which now owns already the two insurance companies ALDAGI and IMEDI L, the biggest pla yers and, moreover, there is a newly established healthcare corporation EVEX that holds approximately up to 35% of the e xisting hospital sector and continues to acquire the rest. As you might be aware in EU developed markets it’s restricted to have such affiliated businesses with insurance sector.
during last four years 7,3 MLN GEL in 2012, 3,3 MLN GEL in 2013, 40 MLN GEL profit in 2014 and 2,3 MLN GEL loss again in first IIQ of 2015. These fluctuations are mainly caused because of poor regulation, which gave possibility to the insurance companies to generate their profits in non-profile assets by using insurance as a customer attraction tool to their main businesses. Even in the 2014 roughly the half of 40 MLN GEL profit w as generated from non-profile assets. Another factor of given picture is hat the regulation of insurance sector was placed under National Bank, which was mainly oriented on making positive business climate for banking rather than insurance sector, and this legislative base is a heavy heritage from the previous governance. At the moments it’s already two years that the Insurance State Supervision Service is separated from the National bank and we hope that the promises made about favorable changes are to come from 2016.
What are the tendencies of growth in re-insurance market?
It is known that the core principle of insurance is reduction of insurance risks due to growing pool, and therefore increase profitability. This is a key factor in the growth of the insurance sector capital and is a major factor of the growth and decline of the share of reinsurance trends; If the growth of country's economy and the insurance market will be irreversible the insurance sector will be able to undertake more risks (due to the capital increase) and reduce the share of reinsurance which will cause a reduction of capital flight from the country.
Which insurance products is the most popular today?
Health insurance is leading among the most popular products, where the state played an important role, which several years earlier initiated the healthcare project and provided the health insurance to the people under the poverty level. Later the project was expanded countrywide and the state insurance covered almost all citizens of eorgia. As a result a social package is being offered in most jobs.
The Motor transport insurance becomes more popular year by year either. After the recent flood the demand for property insurance increased. Bonds insurance is quite popular among the real estate companies and cargo insurance is used by most transportation companies, especially international ones.
How the present macroeconomic situation affects insurance sector in Georgia?
As already mentioned earlier the permanent economic growth is vital for the insurance sector, however, current macroeconomic situation in our country and commonly in the region promises less favorable growth prospects because under low economic growth, high inflation, unstable exchange rate and drop in business revenue the purchasing power decreases; Based of the above said, our country’s macroeconomic condition hould change positively to have favorable impact on the insurance market
How would you evaluate the insurance culture in Georgia?
As you can see the insurance culture is poor in Georgia. Most of the insurance cases we have are collateral insurance required by banks. Unfortunately very small portion of legal bodies as well as individuals think of the insurance as an integral part of their business and life.
What regulations need to be implemented by the government for further development of the sector? What are the main challenges facing insurance sector in Georgia today? What would you change?
The types of compulsory insurance should come in force and cover MTPL, Natural Disasters, and Third Party Liability Insurance. The insurance market should be separated from the healthcare, banking and pharmacy sector and it should be drawn nder a strict policy regulations. All these would help to liberalize the investment outlook and assure the safety of investments.
13.11.2015
