Levent SONMEZ: I believe insurance awareness is lacking in Turkey, in other terms, the significance and the necessity of insurance are not widely understood by the most people. Moreover the importance of the dangers and risks to which they are exposed is either overlooked or underappreciated. People still think that paying insurance premiums and expenses is burdensome and they prefer to live with the rick of not being fully indemnified in the event of a loss.
But this also shows the huge potential of the market which needs to be supported by raising insurance awareness. Raising insurance awareness in Turkey is one of the five main principles of ANADOLU Sigorta's "Missions". Accordingly, the company aims to enhance its contribution to the industry's and economy's growth without compromising on its ethical principles or on its target of profitable growth.
XPRIMM: How important is price in the customers' decision to buy insurance?
L.S.: Despite all the cliches saying that the "price should not be the first criteria when buying insurance", the price is one of the most determining factors from a customer's pint of view. I think instead of criticizing this behavior, we must accept and internalize this natural fact. All sales channels are steering their customers for the best price. For sure, price is not the only criteria for having an insurance, but it is one of the main factors in buying insurance just like in any other service or product. Therefore, besides the unconditional customer satisfaction, the excellence in risk selection, good underwriting and effective cost control became the key factors for sustainable growth and profitability for an insurance company.
XPRIMM: How would you describe the competition on the local market?
L.S.: The economic growth and the insurance sector show parallel evolutions in all developed and developing countries. When compared to other countriees, the Turkish insurance sector has not yet reached the saturation point, while standing forward as a sector continuing its development with high potential.
As an emerging market, the Turkish insurance sector is offering many opportunities to foreign investors and the share of foreign capital has increased.
As of 2015, in the Turkish insurance sector, 26 of 36 non-life insurance companies and 17 of 23 life and pension companies have international capital directly or indirectly. The share of international capital is 50% or above in 38 of the companies.
Premiums production in the motor branch, driven by increased insurance awareness and record automotive sales, grew faster and had a higher share of total premiums production than the other branches. However, relentless price competition prevented a real growth which didn't contribute to the companies' profits or equity.
There have been serious problems in making the premiums received cover indemnities paid on motor insurance policies, and these problems have continued for years.
The motor branch's frequency of loss and share of indemnity payments are much higher than the other branches'. The cost of losses steadily increased as the automotive industry raised the prices of spare parts at rates higher than inflation. The loss/premium ratio fell over the years because the premiums production increase was larger than the indemnity payments increase.
XPRIMM: Which are the insurance lines that hold the most potential in the near future?
L.S.: One of ANADOLU Sigorta's main aims is to broaden the market with the right products after discerning the direction of the country's development. Turkey experienced rapid growth in recent years, thanks to structural reforms and new financial strategies. In order to support sustainable growth, it is important to enable small and medium sized enterprises, which provide expansive employment, to grow and become more competitive. Projections give priority to professional indemnity insurance as products to be improved, so ANADOLU Sigorta launched the 'SME Package Policy' to provide, especially in times of crisis, more security to SMEs, which add big value to the country's economy. Developed by analyzing the enterprises' requirements, this product aimed to increase the SMEs' competiveness and export capacities, thus contributing indirectly to Turkey's economy.
Professional indemnity insurance, which protects the insured against indemnities to be paid for losses caused while practicing their profession, is expected to spread to a wider range of professions, thus expanding the number of participants in the near future. In line with these expectations and while developing the range of products for SMEs, ANADOLU Sigorta is focusing on and investing in professional liability insurance products.
ANADOLU Sigorta maintains its function of shaping and setting the standards for the Turkish insurance industry through its innovative applications and solutions. In this context, the company has continuously increased its contributions to the maritime industry and handled, under the heading of Transportation Insurance, all transportation insurance, and hull and associated risks insurance policies.
XPRIMM: Are there any changes needed to the regulatory framework?
L.S.: Due to the high financial losses in the motor liability line in the past few years, premiums have increased significantly. This also caused huge complaints from policy holders and civil organizations. The challenging environment created by these disturbances has started a chain reaction in the insurance sector and the government regulators in order to find a solution. With the studies which are conducted by the Treasury Undersecretariat, the new legislation and regulations have come into force. We do not expect the new ones, as the sector needs some time to digest the current ones.