The Georgian National Competition Agency has completed the monitoring of the market of the supply/offer of insurance products in the process of realization of banking products by commercial banks. The Agency issued 6 mandatory recommendations for consideration in order to improve the competitive environment in the market.
According to the Agency's assessment, in 2020-2022, the market of credit products is highly concentrated, and, at the same time, it had a stable character and share distribution among large undertakings.
During the specified time period, 15 commercial banks offered credit products.Along with credit products, the supply of insurance products is fixed in the case of 10 commercial banks, among them, the overall market share of the two largest commercial banks was stably high in the time under review and had a stable proportion at the individual level. Furthermore, the market share of one undertaking exceeds 40%, indicating a dominant position and the market share of one undertaking overcomes the threshold of the dominant position.
According to the Agency, there may be a conflict of interest as a result of the structural direct/indirect connection between commercial banks and insurance companies, as well as the presence of specific "remuneration schemes," as a result of which the consumer may choose/offer the insurance company's product, which in a specific case may not be the best choice for the consumer.
According to the Agency's recommendations:
1. Specific criteria for the selection of three insurance companies should be established at the legislative level, and the commercial bank will be required to use them in the selection process.
2. Following the legislative regulation of the selection criteria, the National Bank of Georgia should conduct continuous monitoring of the selection process conducted by commercial banks, and in the case of violations, the response provided by the legislation should be made.
3. Existing/potential cases of conflict of interest should be regulated at the legislative level in order to avoid any negative impact on the market/competitive environment.
4. Monitor the offerings of the three chosen insurance companies to see how well the commercial bank gives the consumer the opportunity to make an informed decision.
5. It is important to regulate the consumer's right at the legislative level to change insurance companies at any time during the credit product's validity.
6.According to the Agency's position, it is critical to develop acceptable market conditions in order to provide proper information to consumers, which in turn ensures the creation of further competitive pressure in the relevant market. For this purpose, the Agency believes that the industry regulator should develop and/or facilitate the development of a specific digital platform, where commercial banks will post the necessary information regarding the contract's minimum requirements, and insurance companies will be able to offer a price in accordance with these conditions.
The Agency began monitoring last year, based on the statement of the "Insurance Union" and the National Bank of Georgia's 2022 financial stability assessment. The monitoring was implemented in collaboration with the National Bank of Georgia and the Insurance State Supervision Service of Georgia.
