GEORGIA: only 2% of GDP is spent on insurance

8 November 2021 — Marina MAGNAVAL
Premiums paid by clients of insurance companies in Georgia amount to only 2% of GDP, which is about 4 times less than the world average. As Soso ARCHVADZE, an expert in statistics, noted, if Georgia on average lags behind the development level of the world economy by 10-15%, then its lag in the insurance segment is much higher, Business Georgia reports.

According to the expert, the insurance sector of Georgia has reached a certain level and stopped growing, this is being the reason for which the insurance culture of the population is low. The level of the insurance sector's development is evidenced by the statistical data: for example, in 2020, the global average insurance penetration was 7.4% of GDP (approximately USD 809 per year for Georgia), and in some countries this figure is much higher - in the USA it is 12% of GDP (about USD 7,673 per year for Georgia), while in Georgia the penetration level is only 2% (or USD 84).

"Of course, the statistics does not consider the state health care program, and it is only about premiums paid to private insurance companies. In recent years, there has been very little growth, but not enough. Georgia has a better position in comparison with other countries of the region, but for us the reference point should be countries with a high level of development of the insurance sector, and not the same "backward" countries as we are", stressed Soso ARCHVADZE.

Experts note that Georgia is one of the few countries where there is not a single type of compulsory insurance. The head of the Insurance Association Devi KHECHINASHVILI said that the problems begin at the legislative level, since the authorities do not see any need for at least several types of general insurance.

"First of all, this means low insurance culture of the population, which, in theory, could have been developed in 30 years. The state should participate in insurance relationships, and compulsory insurance should be the main tool. This is happening all over the world, but in our country this issue is left to chance. The insurance companies themselves are fighting as best they can, but their opportunities are limited. Insurance does not play an important role in the Georgian economy, and this is a systemic problem", says Devi KHECHINASHVILI.

One of the basics of the insurance industry worldwide is motor insurance. "Until introduction of compulsory insurance, this situation will not improve. Currently, the main segment in the insurance business is healthcare, which accounts for more than 50% of GWP, and now it is already unprofitable. Health insurance is on the verge of unprofitableness, and for it to continue to work, it is necessary to develop other LoBs as well", explained the head of the Insurance Association. Currently, 1.5 million vehicles are registered in Georgia, of which only 80,000 are insured, or 5-6%, Business Georgia wrote.



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