What insurance and insurance activity mean
Insurance is a relationship formed to protect the personal and property interests of natural and legal persons. The protection operates when a defined circumstance — an insured event — occurs, and it is financed from the monetary funds formed through insurance contributions (insurance premiums) paid by these persons, together with other sources permitted by the legislation. Insurance activity, in turn, is the insurer's activity connected with the conclusion and performance of insurance and reinsurance contracts. Understanding these two notions is the starting point for identifying every party to an insurance relationship.
Insurance is carried out in voluntary and compulsory forms. Voluntary insurance rests on a contract concluded between the insurer and the policyholder, and its types, conditions and procedure for implementation are established by that same contract; any licensed insurance organization of Georgia may conduct voluntary insurance. In compulsory insurance, by contrast, the object of insurance, its types and the procedure for implementation are determined by the relevant legislation on compulsory insurance. Where compulsory insurance applies, the insurer is obliged to conclude a contract with the policyholder on the conditions defined by law, although it has the right to offer the policyholder conditions even more favourable than those established by law.
What may be the object of insurance
The object of insurance may be any property-related or personal non-property interest that does not contradict the legislation of Georgia. The law distinguishes the principal branches as follows:
- personal insurance — insurance connected with the insured's life (including annuities), health, working capacity, pension provision and other personal interests;
- property insurance — insurance connected with the possession, disposal and use of property;
- liability insurance — insurance connected with the damage that the insured causes to a third person (natural or legal) or to that person's property.
Within this framework, the object of insurance may be a specific item of property, an interest connected with a person's life or health, or the risk of liability before a third person. The decisive requirement is one and the same in every case: the interest must not contradict the legislation of Georgia.
The policyholder — who concludes the insurance contract
The policyholder is the person who has concluded an insurance contract with the insurer. The policyholder may be either a legal or a natural person; the law imposes no prohibition based on the person's status. There is, however, an important restriction concerning the counterparty with whom the contract may be concluded.
A legal person registered in Georgia may conclude an insurance contract connected with activity carried out on the territory of Georgia and with property located on that territory — other than a reinsurance contract — only with an insurance organization licensed by the state supervision service. The same rule extends to a citizen of Georgia: on the territory of Georgia, that citizen may conclude an insurance contract only with an insurance organization licensed by the service. Accordingly, checking the insurer's licence in advance is a practical precondition for a validly structured relationship.