Who supervises the insurance market
State supervision over insurance activity — and, within the frames determined by the Law of Georgia on Voluntary Private Pension, over voluntary private pension activity — is exercised by the Service: an independent body with special legal capacity, created by the state for the purpose of regulating the sphere of insurance. The Service is independent in its activity and accountable to the Government of Georgia; the Government is authorized to suspend or revoke an unlawful decision of the Service.
A supervisory board with consultative functions is created at the Service and consists of 7 members. Its membership includes the chair of the Finance and Budget Committee of the Parliament of Georgia, the Minister of Finance, the Minister of Economy and Sustainable Development, the Minister of Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Protection, the Minister of Environmental Protection and Agriculture, and 2 experts nominated by the Prime Minister of Georgia. The Service is headed by its Head, who is appointed to office and dismissed by the Government of Georgia for a 5-year term, upon the nomination of the supervisory board.
The rate of the supervision fee
The amount of the supervision fee is determined from the gross premium earned by the insurer during a calendar year and/or from the insurer's own income in the accumulating and refundable types of life insurance. The rates established by law are as follows:
- 1 percent of the gross premium earned annually by the insurer;
- 1 percent of the own annual income received by the insurer in the accumulating and refundable types of life insurance.
The obligations of the insurer and the intermediary towards consumers
The insurer and the insurance intermediary are obliged to ensure the protection of consumers' rights at every stage — during pre-contractual relations with the consumer, during the validity of the contract and during the full performance of the obligations envisaged by the contract — in accordance with the requirements of the Law on Insurance and the Law of Georgia on Protection of Consumer Rights. The insurer must also protect consumers' rights according to the procedure established by the Service and in accordance with its own internal consumer-protection policy and consumer-protection procedures. Protection therefore does not end at the moment the policy is sold — it extends over the entire life of the contract.
The Service is authorized, for the purpose of ensuring consumer-rights protection, to supervise the performance of these obligations by the insurer and the insurance intermediary, to issue legal acts, carry out appropriate measures, give written instructions, impose additional requirements and corresponding restrictions. When exercising supervision, the Service may, in accordance with the rules established by Georgian legislation and sub-legislative normative acts, request and process information about the applicant or another consumer, including personal data, while the insurer and the insurance broker are obliged to provide this information to the Service.
Where a consumer applies when rights are violated
If the insurer or the insurance agent has improperly performed its obligations, the consumer has the right to apply to the relevant structural unit of the insurer, to the court and/or to any other public or private institution with the relevant authority — and, where the consumer's rights have been violated by the insurer or the insurance agent, also to the Service. A similar rule operates towards the insurance broker: where the broker improperly performs its obligations, the consumer applies to the court and/or any other authorized public or private institution, and in the event of a violation of rights — also to the Service.
Analogous protection is ensured in the pension sphere as well: a participant or beneficiary defined by the Law of Georgia on Voluntary Private Pension has the right, where an asset management company, an insurer or a pension company improperly performs its obligations under that law, to submit a claim to the asset management company, the insurer or the pension company and/or to the Service, in the procedure established by the same law.
Which violations trigger sanctions
The Service is authorized to apply sanctions against the insurer and/or administrator if the insurer or the administrator has committed any of the following violations:
- violated a provision of the Law on Insurance or any norm, instruction, rule, requirement or written instruction of the Service;
- violated the deadline for submitting reports, or submitted incorrect reporting or other inaccurate information;
- violated the requirements of the Law of Georgia on Facilitation of Suppression of Money Laundering and Terrorism Financing and/or subordinate normative acts issued on its basis;
- violated the requirements of the Law of Georgia on Protection of Consumer Rights;
- violated the requirements of the Law of Georgia on Additional Supervision of Regulated Enterprises within a Financial Conglomerate or certain requirements of the Law of Georgia on Transformation into Securities.
The system of sanctions against the insurer and the broker
Upon detection of a violation, the Service may — sequentially, or, depending on the seriousness of the violation and the possible risk, non-sequentially — apply the following sanctions against the insurer and/or administrator:
- sending a written warning;
- imposing special measures or issuing an instruction (indication) requiring the insurer to stop and further not allow this or that violation and to take measures to eliminate it within the period determined by the Service;
- imposing a monetary fine in the manner and amount established by the Service;
- suspending the administrator's authority to sign and requesting the supervisory board/general meeting to temporarily remove or dismiss the administrator from office;
- suspending or restricting the distribution of profit, the payment of dividends and material incentives, and the taking of new obligations;
- in exceptional cases, where the interests of the policyholder and the insured are threatened — suspending their right to carry out specific operations and introducing a compulsory administration regime;
- revoking the insurance activity license.
For the insurance broker, the law envisages separate sanctions. Against the broker and/or its administrator the Service may: send a written warning; impose special measures or issue an instruction (indication) requiring that the violation be stopped and not allowed in future; impose a monetary fine in the manner and amount established by the Service; and cancel the insurance broker's registration. The grounds for sanctions against the broker are likewise defined specifically: violation of a provision of the law or of any norm, instruction, rule, requirement or written instruction of the Service; violation of the reporting procedure or deadline, submission of incorrect reporting or other inaccurate information; violation of the requirements of the Law on Protection of Consumer Rights; and violation of the requirements of the law on facilitation of suppression of money laundering and terrorism financing and acts issued on its basis.
The law also fixes a general principle: an imposed sanction must correspond to the seriousness of the violation and the possible threat. A minor defect is therefore met with a lighter response, while a systemic and grave violation may end in the revocation of the license or the cancellation of the broker's registration. If your rights have been violated in the sphere of insurance, apply to the insurer's relevant structural unit, the courts, another authorized institution or the Service — it is the Service that holds the power to trigger the sanctioning response.