Insurance Association: We are Waiting for a Signal from the Government

An interview with the head of the GeorgianInsurance Association Devi Khechinashvili

 

Do you understand the motivation for which the government has decided to postpone the income tax reform?

 

The first thing that I do not understand is on what basis the different sectors of the economy have been combined in the financial sector - we are talking about three industries that have their own development vectors and problems. In regard to  the insurance, I can say that we really needed  the reform in  our sector. We have presented the arguments, which at this stage have not been taken.

 

Whether  the  reform  delay is  the continuation of the processes that are taking place in the country  when the state competes with  the insurance business?

 

While we cannot say that the state is competing with us  by implementing the universal health care program. Of course, changes in the industry, when  private companies have been banned from participation in the program, were  difficult for the insurance companies, but we have become accustomed and adapted to the new conditions, and now we look forward.

 

Now we will try to explain to the government that we also need support.

 

 What measures should be taken to promote the insurance business?

 

First of all it’s compulsory insurance of transit traffic across Georgia, which will help to attract funds to the budget on the one hand, and will give impetus to the development of the insurance industry - on the other.

 

Besides, now we need a signal from the government, especially amid a postponement of the  reforms for the financial sector.

 

 What are the main arguments that the reform should relate to the  insurance business as well?

 

The insurance industry needs to increase capitalization. The reason for this is that we are increasing capital requirements for companies, and for this the change of the principle of accrual of income tax would be very timely.

 

The fact that we were not involved in  the program carries a risk and is  a bad signal to investors. While I cannot say how this will affect the attraction of investments.

 

Whether the compulsory insurance is considered as the mechanism to balance the loss as a result of  non-participation in the tax reform at the first stage?

 

In this case, the balance is not financial, it is purely about the mood, the confirmation that the insurance business is a priority for the government.

 

Today we do not see that our sector is indeed a priority. Georgia is a unique state where the government does not use insurance for risk management. We are involved only  in the agricultural insurance program.

 

Why do you need the state intervention, will private companies not be able  to ensure proper operation of the insurance sector?

 

This is the specificity of insurance, and it concerns not only the countries with low insurance culture, but also those  in which the insurance is the norm for many decades. Everywhere the government uses the insurance companies for risk management, as  no one wants  to depend on the competence of individuals.

 

Can such regulations  be introduced  in a country with low living standards and a minimum level of economic growth?

 

Certainly. Moreover, they will contribute to the economic development of Georgia.