Page 8 - Turkinsurance Digital Magazine

6 cover story

Price cap, one of the most important regulations in 2017

Another circular was issued on 10 April 2017, deeply impacting
the insurance market. Constantly increasing traffic premiums since
2015 had drawn reaction from policyholders and insurance rate
began to decrease despite being a compulsory type of insurance.
The Circular on the Premiums of Motor Vehicles Compulsory Third
Party Liability Insurance brought along a new expansion on this
area. The circular based on a price cap limitation announced: “For
the sustainability of compulsory traffic insurance system, it is highly
important that the premiums are high enough for insurance com-
panies to compensate for the offered coverages and low enough for
policyholders to be able to pay. This consistency is closely monitored
by the Undersecretariat.” Price cap system was therefore put into
force to be effective between 12.04.2017 and 31.21.2017. The cir-
cular decided that the price cap would be increased by 1 percent
every month. The circular was severely criticized by the insurance
market since the free tariff was left behind; however, it was appreci-
2nd regulation of the year 2017 came into force as of 2 January ated by the policyholders as the premiums were decreased. Several
with a Cabinet Decision regarding the agricultural insurance sys- discount increase rates were also determined for the application,
tem. According to the Cabinet Decision on the Premium Support while price caps were determined according to the vehicle type and
Rates, and Risks, Products and Regions to be Included in the Scope scales based on cities.
of Agricultural Insurance Pool”, hail package for crops includes
main hail risk as well as the subsidiary risks of storm, whirlwind, Excess of loss support in agricultural insurance
fire, landslide, and submersion. The package can be extended on a
voluntary basis to include frost coverage for fruits cultivated in open According to the Cabinet Decision on the Excess of Loss Support
areas, hail weight coverage for orchards, as well as damages by wild Committed by the State for the District-Based Drought Insurance
boars and rain coverage for cherry. Fruit trees and grapevines will in Agricultural Insurance Pool, a risk sharing and reinsurance plan
be covered against the risks of hail, storm, whirlwind, fire, landslide, for the district-based drought productivity insurance was approved
vehicle crash, weight of snow, flood and submersion. Greenhouses by the Board of Agricultural Insurance Pool. According to this plan,
are entitled to be insured against the similar risks, while cattle and the state committed excess of loss support for over 150 percent
sheep and goats can now be insured against death risk and theft. of the loss ratio in district-based drought productivity insurance
Poultry and aquaculture were included in the scope of state support- that arises from insurance contracts signed between 1.1.2017 and
ed agricultural insurance; while beekeeping activities can be insured 31.12.2017 but cannot be transferred via reinsurance and retro-
against the risks of storm, whirlwind, landslide, earthquake, flood cession.
and submersion, vehicle crash, transportation and wild animal at-
tacks.
Pool model in traffic insurance
Change of tariff in compulsory earthquake insurance
Another radical change for the insurance market came with a reg-
ulation issued as of 11 July 2017 for traffic insurance. According
According the Communiqué on the Tariff and Instructions for the to the Regulation on the Amendment of the Circular on the Pre-
Compulsory Earthquake Insurance which was announced on the miums of Motor Vehicles Compulsory Third Party Liability Insur-
same date, premiums to be paid by policyholders will be calculated ance, a risky policyholders pool was established for grades and/or
by adding 10 TL to the calculation of the sum insured based on the vehicle groups with high loss frequency to be applied starting from
earthquake region and construction type. This amount will be 15 12.04.2017. Premiums and losses concerning the traffic insurance
TL for the risks located in İstanbul. Minimum premium amount will policies within the scope of this pool will be shared among the insur-
not be lower than 75, 65, 55, 45 and 35 TL respectively, for the ance companies registered in Turkish Motor Insurers' Bureau. With-
earthquake risks zones from 1st to the 5th degree. Premiums will in the scope of this pool application, insurance companies avoiding
be reduced by 10 percent for buildings certified in 2007 or later; to draw insurance policies for those vehicles and therefore warned
whereas a premium deduction of 20 percent will be applied in case by the Undersecretariat will be prevented from accessing Insurance
all residents in a building/compound is insured at once. According Information and Monitoring Center system screens, unless they fix
to the Communiqué, the lowest amount for the sum insured will be this problem. This precautionary interruption will last for 3 to 10
170 thousand TL.
days. According to the regulation, all vehicle groups in 1st, 2nd and