The prospects for the private insurance industry in Greece do not look particularly bright in the short term, as they seem to depend on a number of factors such as reform of social security, the creation of effective oversight mechanisms and the provision of tax incentives, according to a study by the Foundation for Economic and Industrial Research (IOBE). The study notes that the Greek insurance market shows a large margin for growth in comparison to those of European Union partners, on condition that the sector’s serious problems are tackled soon and effectively. According to IOBE, such problems may be grouped into two categories; the first includes those emanating from the existing legal and regulatory framework, and the second those problems relating to market structure and the daily operation of insurers. The study concludes that the future of the Greek insurance market will mainly depend on pricing policy and its emergence as the third pillar of the country’s social security. Another related factor is seen as the development of a broader awareness that private insurance can indeed become such a third pillar, complementing main and auxiliary pension funds with alternative assurance schemes. Demand for private insurance cover grew at a rapid pace in the 1989-2001 period, with per capita premiums rising at an average annual rate of 17.4 percent. The life insurance segment’s growth rate was 19.3 percent. The rising demand is reflected in the higher share of expenses for insurance cover in total household outlays, which rose from 0.36 percent in 1989 to 1.90 percent in 1999. Car and travel insurance absorb 49.7 percent of households’ insurance expenses. The number of insurance firms operating in Greece fell considerably due to mergers, acquisitions and closures between 1992 and 2001, when it stood at 107 – most of them active in general insurance alone. The study cautions that a large number of small insurers, active mainly in the car insurance segment, attempt to capture market shares by charging excessively low premiums, without proper risk management. A separate study by business research company ICAP, released last December, also noted a substantial potential for growth in the life, pension and health insurance fields, where two-thirds of the economically active population state they have any cover. On the basis of the European Union average, the insurance market is seen with a potential of growth to an annual 7-8.5 billion euros – about six times present levels. Insurers paid out an average of 640 euros per minute for hospital cover in 2002.