Developing and growing Turkey has continued to provide chance areas to insurance sector in 2013 too and has achieved a growth of 22% in premium production by the end of the year. 4.4% growth of Turkey, which has been over the expectations, in the first three quarters of the year, reflected positively on insurance sector. Lower insurance spending in Turkey compared to similar countries returns as growth to the sector as proper economic conditions are achieved with positive developments like growth of mid-class income levels and rising tendency of insurance awareness. A similar process was experienced in 2013, during which the economy had a positive course.
Despite the lack of profitability, which has become the chronic problem of the sector as a consequence of extreme competition and wrong pricing, Turkish insurance sector still keeps its attraction. If expected developments and improvements are brought into life in the sector, written premium amount in non-life branches may reach TRL 63 billion and possible to rank Turkey among first 16 in the next 10 years.
Solution of pricing problems in current market, taking prices to normal (where it should be) levels and with the elimination prevention of structural problems, which reduce profitability of companies, it is possible that profitability in the sector may reach better levels. This positive expectation makes insurance business one of the most dynamic sectors of the economy. Initiatives like founding new companies, mergers or acquisition of existing companies in 2013 are indicators for the liveliness in the sector.
By the end of 2013, total premium production has increased by 22.2% and reached TRL 24.23 billion. TRL 20.8 billion part of this has been obtained from nonlife branches, while TRL 3.4 billion part of it has been obtained from life insurances. Annual growth rate in non-life branches has been 21.7%, while it has been 25.3% in life insurances.
Passing to free tariff in traffic, new arrangements in vehicle insurances and possibility of 4 types of vehicle insurance preparation in addition to the renewal of Private Health Insurances Legislation can be considered among the most important developments of the year in terms of insurance sector outside of elementary branches. The most important one of these arrangement, which is related with both insurers and insurance companies is the guarantee of lifetime renewal of private health insurances with the same plan. Fullindependent implementation period will be passed in January 2014 for traffic insurance premiums, while bringing transparency and easy access to information by making companies obligatory to publish their premiums on their webpages. With the new arrangement in vehicle insurances, policy is made more informing to insurers with different options like repairing the vehicle in original service or any service desired by the insurer or with original parts or equivalent parts.
On the other hand, Personal Pension System (PPS), which has celebrated its 10th anniversary in 2013, had a bright year with state contribution practice started on January 1st and the number of people retired from the system has reached to 7,382. With the growth to be reached by PPS in the upcoming 5 years, it is expected that the issue will be intensely discussed in the finance sector. When annual inflation, which has been 7.4% based on Consumer Price Index, is taken into consideration, insurance sector had 14% growth in 2013. Non-life premium production covered 86% of total production and turned out to be TRL 20.83 billion. Meanwhile, life branch had 14% share and recorded as TRL 3.4 billion.
Motor vehicles liability (traffic) insurances increased by 37% in 2013 compared to previous year and reached TRL 5.38 billion, taking leadership from motor vehicles and increased its production share within the sector from 20% to 22%. Meanwhile, the growth rate in motor vehicles (vehicle insurance) with written premium of TRL 5.26 billion was recorded as 11%. Fire and natural disasters insurances followed with TRL 3.32 billion, illness/health insurances came as TRL 2.47 billion and general damages followed with TRL 2.19 billion.
When compared with previous year, an important improvement has been achieved in the sector and thanks to correct calculation premiums and control of costs, profitability has been achieved. Meanwhile, even though the prices increased in traffic insurances in 2013, there has been loss more than TRL 500 million by the end of the third quarter. It is inevitable to make arrangement in traffic insurances, just like in vehicle insurances.
Lower damage payment under previous years’ average in terms of natural disasters like earthquake, storm and flood in 2013, is another positive affecting element for profitability. It is expected that the sector, which has been growing in real terms for many years, to continue this trend in 2014 too. The sector’s total premium production in 2013 and its comparison to the previous year’s figures are shown in the below table:
