Turkey: Auto insurers wary of heavy losses due to premium cap
Source: Middle East Insurance Review | Jul 2017
Motor insurers anticipate that they could make losses of TRY2.2 billion (US$623.9 million) this year since the authorities imposed a cap on motor third-party liability (MTPL) premiums with effect from 12 April. Losses are expected to continue in 2018 if the cap is not lifted.
Motor premiums decreased by 54% in May this year compared to the same month last year as a result of the premium ceiling, according to local media reports.
Auto insurers had hiked MTPL premium rates in the past several years in a bid to keep pace with heavy compensation awarded by the courts for bodily injuries.
The premium hikes covered the losses and allowed insurers to lower premiums subsequently. However, the premium reductions deemed inadequate and implemented too slowly which led the authorities to impose premium caps.
For insurers, pressure on profitability is also exacerbated by rising inflation, driven by depreciation of the Turkish lira.
The authorities are trying to find a balance in MTPL insurance premium rates between insurers and customers. To this end, a study has been initiated for a clearer picture of the situation. The study, which is being carried out with actuaries, is led by Mr Can Akin Caglar, the new President of the Turkish Insurance Association, and Treasury officials. M
TRY1 = US$0.28