GEORGIA: Health insurance - a new business opportunity for insurers?

31 October 2013 — Olesea ADONEV
devi_khechinashviliOn February 28th 2013, the universal healthcare program was launched in Georgia, addressing the needs of citizens who do not have adequate health insurance. In less than five months 1,347,658 people have been enrolled, more than 40 thousand of those being served in an out-patient setting, and almost 15.5 thousand receiving treatment in hospital, which cost the state treasury of Georgia nearly GEL 6.4 million.

Since July 1st, the universal healthcare program has moved to the second phase of implementation, which meant taking care of the expansion of medical services to the population. "In Georgia, universal access to basic health care was achieved through three different tools. Precisely, we know that about 500,000 people have private health insurance. 1,600, 000 people are insured through the state insurance programs, which are paid for by the state and function by means of insurance companies. An innovation - launched on February 28th 2013, with the second phase started on July 1st, is the realization of a new universal healthcare program," said Devi KHECHINASHVILI, Chairman of the Association of Insurance Companies of Georgia.

The universal healthcare program has placed an emphasis on providing emergency in-patient care and out-patient services, and was implemented by the Social Service Agency.

Timely underwriting - the correct premiums

At the present, through the work of state insurance programs Georgia insurance companies are faced with two major problems.

"The main dissatisfaction of the insurance companies are due to uncertainty, namely how long the program will carry on, and we demand that the government setup the medium term, between 3 and 5 years, so that we could acquire the perspective. And the second aspect is that, after the tender was held, the state unilaterally added some of the medical services that were not previously discussed so now the premiums do not match the risk. We demand that the state conduct an actuarial analysis and adjust premiums," said Devi KHECHINASHVILI.

In 2010, a tender was held for the state insurance program for the poor people. The government has divided Georgia into medical areas. At that time it was determined there were one million people living in poverty, for which the state paid the insurance premiums.

Moreover, one of the conditions of the tender was the obligation of the insurance companies that won the tender in a given area to build a clinic or provide timely medical care through other methods in modern hospitals starting 2012.

"As a result, since the end of 2011 and middle of 2012 insurers built 46 new hospitals in the province, not in Tbilisi, which was the basis of the territorially-available health care in Georgia. Insurance companies have invested more than GEL 200 million," explained the Chairman of the Association.

Financial problems vs. large insurers

According to the statement of the expert Levan KALANDADZE, as reported the portal Bizzone.Info, the situation is quite uncertain and vague in the insurance industry and that could be a problem for investors.

According to the Chairman of the Association of Insurers of Georgia, Devi KHECHINASHVILI, ongoing problems exist in companies that work in state health insurance programs in Tbilisi, where the consumption of medical services is much higher than in the provinces.

"The main reason, as I said, is that the government has unilaterally added a number of medical services that were not discussed previously, and now the size of premiums does not match the risk," said Mr. KHECHINASHVILI.

According to him, in 2012 the state has transferred the risk of infectious diseases in the state insurance program. And now, the insurance companies pay not only 50% of the costs which are not for insurance, which are recorded by clinics, but also the salaries of rural doctors that represent over 10% of the premiums. It was not stipulated in the tender. At that time, the former government promised to organize an actuarial analysis and adjusted premiums, but in February of this year, this did not happen.

According to the National Bank of Georgia, the insurance sector totaled a loss of GEL 7 million in 2012.

Who regulates insurance?

In many countries the service of the state supervision of insurance remains separate from the National Bank, which has proven its efficiency in controlling and performing the whole market.

Since 15th April 2013 the state supervision over insurance activities has been carried out by the Service of the state insurance supervision and not by the National Bank of Georgia, as was the case before.

"Here the political sense prevails, but we as insurers care less for it. For us it is important that the State Insurance Supervision be independent and qualified to perform its functions. I do not see any problems with the new structure, but rather the contrary, I see an advantage in the fact that this service will deal only with insurance, because in the integrated supervision there are banking issues which are always more important," said Devi KHECHINASHVILI.

Interesting for foreign investors

According to the Chairman of the Georgian Insurance Association, health financing is a serious problem around the world and the government is implementing different methods which can lead to the reallocation of risks between insurers and health care providers. And due to the above mentioned the Georgian market might present a certain interest for foreign investors.

Moreover, "I think that next year we will add another insurance product - MTPL - to the portfolio of insurers. MTPL insurance will be a major driver for the development of insurance in the country. Three years ago, under the joint cooperation with German colleagues, we prepared a draft law on MTPL, and were tested at the European level. The main advantage with Georgia concerning the introduction of TPL is that the police is not corrupted, and is equipped with excellent information technology. We believe that the introduction of MTPL will be effective and uninsured vehicles will represent less than 1%," explained the Chairman of the Association.

Currently in Georgia there are 800,000 registered vehicles, of which only 45,000 are insured under the voluntary policy CASCO.

According to the Chairman of the Association, the bonus-malus system will not be introduced at this stage. "We will gradually develop it because otherwise a wrong estimation can be made at an early stage. The premium will be a single; there will mostly be competition among insurers on the quality of services."

The one who holds the information, has the power

A special unit was formed within the Georgian Insurance Association, which mainly deals with health insurance because it is a mass product. The unit provides information assistance to the insured.

Moreover, "we set up the Motor Insurance Bureau at the Association office; we already have the first voluntary structure organized by insurers, which works on a voluntary insurance CASCO. The existing Bureau collects the history of policyholders and, later, with the introduction of the MTPL policy our database will be synchronized with the information database of road traffic police, in order to provide better control and results."

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