Page 15 - Turkinsurance Digital Magazine

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However, efforts are underway in our sector to become financially auto insurance sector, both comprehensive and traffic insurance
stronger before a potential Marmara earthquake. Considering the premiums, are lagging behind these rate increases. As a result, un-
potential Marmara earthquake, strengthening the equity structure profitability has been experienced in the auto insurance sector. It
of insurance companies is crucial for coping with large-scale cata- is believed that transitioning to an open tariff system for all auto
strophic risks that may occur in the future. Given that a significant products is essential for a healthy product management. Further-
portion of the compensation for the unexpected and widely dam- more, it is important to communicate to policyholders the impact of
aging earthquake in Kahramanmaraş on February 6, 2023, will other cost elements on policy premiums, provide policyholders with
be covered by reinsurance companies and considering the potential accurate information during policy renewals, and ensure that dis-
Marmara earthquake, the need to create a fund is of great impor- tribution channels provide policyholders with accurate and healthy
tance for the sector. Being able to meet the obligations in the event product and pricing information to ensure the continued health of
of a potential Marmara earthquake and strengthening the sector their insurance coverage.
financially before the anticipated earthquake is crucial not only for
the industry but also for the country's economy. Increasing premiums related to products is another important fac-
tor in reducing losses. Other factors affecting profitability include
Will building completion insurances develop and become more an increase in the number of vehicles, insufficient traffic culture
widespread? How should this be shaped considering disaster and insurance awareness, developments in pricing and claims pro-
risks? cesses, and certain issues arising in the Motor Vehicle Compulsory
Financial Liability Insurance for Highways. As known, within the
As known, as an industry, we have not yet achieved the desired level framework of free market conditions, it is crucial to implement a
of penetration in building completion insurance. In this context, more equitable premium system that rewards good drivers and en-
as previously mentioned, we need some legal regulations to ensure sures that bad drivers are insured with higher premiums for reha-
the widespread adoption of building completion insurance. In order bilitation.
to achieve fair competition against financial institutions, we have
previously expressed our opinion to the relevant authorities that In global practices, the insurance sector not only pays compensa-
there should be regulations regarding stamp duty and fee exemp- tion but also manages risk and rehabilitates the market in the sec-
tions. This is because this situation leads to a significant cost for the tors it provides coverage, necessitating such an approach. However,
insured and creates a serious competitive disadvantage for our in- especially with the implementation of the maximum premium sys-
dustry. A regulation in this area is needed to address the inequality. tem for operators in the vehicle group with a very high claims fre-
On the other hand, the issue of building completion insurance not quency such as taxis, minibuses, and vans, it has become impossible
being accepted as coverage in urban transformation by the Ministry to implement a model where costs are kept under control. An anal-
of Environment and Urbanization has been on our agenda for a ysis indicates that as of the third quarter of 2022, non-Pool traffic
long time. In this context, we have prepared a new general terms policies were written below the maximum premium by 14.83%,
and conditions document that directly refers to Law No. 6306 while as of the third quarter of 2023, the deviation from the maxi-
and shared it with the regulatory and supervisory authority of our mum premium was 3.52%. As of the third quarter of 2022, in the
industry. Following the publication of the new general terms, we branch that incurred a technical loss of 7.9 billion TL, including
anticipate that building completion insurance will be accepted as investment income, the technical loss reached 10.6 billion TL as
coverage, and its penetration will increase. of the third quarter of 2023. When investment income is excluded,
no company in the branch is profitable, and the technical loss has
It is known that urban transformation is designated as a priority reached 24.8 billion TL.
area in the medium-term plan. We expect to play a more significant
role in the system as insurance companies, both with building com- In the Motor Insurance branch, where 40 companies operate, it is
pletion insurance and with structural inspection insurance, which adversely affected by spare part and labor costs. Additionally, the
we believe is supportive in nature. increase in the sales of new vehicles has a positive impact on the
Motor Insurance branch because this insurance is mostly purchased
What would you like to say about the unprofitability issue in for vehicles in the 0-5 age group.
the auto insurance sector? Is it possible to prevent this situa-
tion? Furthermore, due to the majority of new vehicles being purchased
with loans, the sales of vehicles and, consequently, the Motor In-
The unprofitability issue in the auto insurance sector is fundamen- surance branch are influenced by the interest rates offered by banks
tally attributed to cost elements beyond the control of the indus- to customers. Considering all these factors, the increase in vehicle
try. For many years, the sector's most significant problem has been prices, along with the upward trend in premium volume and invest-
the inability to manage cost items stemming from inflation, being ment income, are important factors contributing to the improve-
compelled to track these costs, and dealing with factors such as ment in the Motor Insurance branch. In addition to the increase in
the frequency of regulations, ceiling tariffs, and companies' reserve exchange rates, the rising sales of high-value electric vehicles, the
management, all of which contribute significantly to the unprofit- surge in sales of new vehicles, especially in the second half of 2023,
ability issue. have led to an increase in premiums, thus continuing the decline in
the Loss Ratio. As a result of the reflection of the economic prob-
The most significant cost items affecting the costs are the exchange lems at the global level, the insurance sector has continued to take
rate and supply chain costs due to the majority of parts being im- precautionary measures, and these measures have brought positive
ported. The second most important issue is the minimum wage in- results in the Motor Insurance branch. The technical profit, which
creases, both in labor wages and bodily injury files. As is known, was 3.2 million TL as of the third quarter of 2022, has increased to
the minimum wage in our country has increased twice a year for 21.8 billion TL as of the third quarter of 2023. When the technical
the past 2 years, and both the incurred costs and their reserves profit and loss results are examined excluding investment income,
have increased in similar proportions. In contrast, premiums in the the technical profit is approximately 5.9 billion TL.