Turkey has implemented reform of motor third-party liability (MTPL) insurance to decrease significant losses incurred by insurers over the last 10 years, while lowering insurance premiums for consumers.
Amendments to the Highway Traffic Law were passed last April as part of the government’s agenda to improve profitability at insurance companies. The preamble of the law states that the new rules for MTPL insurance are enacted to clarify insurance product coverage, and align coverage with market conditions and actuarial principles.
The amendments would help reduce insurers’ losses in MTPL through standardised compensation calculations which would permit insurers’ costs to be more accurately projected, said Mr Muhsin Keskin, a partner at Esin Attorney Partnership, a member firm of Baker & McKenzie International.
The Treasury will implement a method that considers the person’s age, occupation, and their dependents, eliminating courts’ reliance on expert-witness damage approximations that have resulted in increases of up to 40% in insurance claims. This will decrease insurers’ statutory provisioning, and the MTPL insurance premiums paid by the insured.
Mr Keskin pointed out that the Highway Traffic Law and Motor Third Party Liability Insurance General Conditions will take precedence over the tort-related provisions of the Turkish Code of Obligations in the calculation of compensation. Previously, no clear hierarchy was established between the Highway Traffic Law and Turkish Code of Obligations, resulting in inconsistent interpretation by courts.
In addition, under the amended law, injured parties must now apply to their insurer before initiating litigation or insurance arbitration. Previously, injured parties were allowed to file claims directly with a court. This is expected to cut the number of court cases which will decrease the courts’ involvement and the lengthy insurance claim process.
This is expected to decrease insurer litigation costs, said Mr Keskin.
Exemptions to MTPL insurance coverage are also now clearly defined to include claims arising from the fault of drivers (reversing a previous high court precedent from 2011 that allowed claim payments to the heirs of a deceased driver at fault).
MTPL insurance results in significant losses for non-life insurers operating in Turkey, amounting to TRY2.3 billion (US$769.4 million) in 2015, and a total of TRY7 billion in the last decade.
Mr Keskin said: “Insurers’ ability to accurately project the costs relating to MTPL insurance products through harmonisation and clarification of the applicable rules will be the main driving force to control MTPL premiums. Another purpose is to speed up MTPL insurance claim cases before courts by requiring that claims be first submitted to insurers.”
TRY1 = US$0.33