The Turkish government has gazetted amendments to the insurance legislation, a move that, among other things, has led to the establishment of a High-Risk Insurance Pool to cover mandatory motor third party liability (MTPL).
Buses with 31 or more seats, taxis, mini buses, trucks and vehicles which have previously been the cause of motor accidents, are covered by the pool.
The pool’s members are insurers licensed to conduct motor insurance business. The management of the pool is carried out by the Turkish Motor Vehicle Bureau (TMTB).
All work and transactions related to the pool will be subject to audits by the Undersecretariat of Treasury. Disputes between insurers and the pool will be decided by the TMTB with the appropriate opinion of the Undersecretariat. Claims will be processed by the insurers from which the policies are bought.
The sharing of premiums and claims paid among insurers is calculated in two parts. Under the model, 50% of the pool will be based on the market share of motor insurers in the last three years. The remaining 50% is distributed equally among the insurers.
For a start, the share will be calculated based on the traffic insurance premiums for the period 1 January 2014 to 12 April 2017. The share will be calculated at the beginning of each year and will remain constant throughout the year.
The pool was proposed because some insurers had avoided covering high-risk vehicles, such as buses and commercial goods carrying vehicles, after a ceiling price was imposed on compulsory traffic insurance.
Ceiling on premiums
However, there is now debate over the ceiling which has been imposed on MTPL premiums since 12 April. The maximum premium varies depending on vehicle category and geographical location by province. The ceiling is imposed to curb high MTPL increases. It has lowered by at least 40-50% the premiums to be paid by high-risk drivers and those who have been the cause of more than one accident previously. This means that current premium rates are not as strong a deterrent for high-risk drivers compared to previously.
In recognition of the risk pool, the discount rates on premiums have also been re-determined for taxis, minibuses, buses, trucks and tractors and other vehicles covered by the pool.
The MTPL pricing system has seven pricing levels. For example, a first-time driver is insured at Level Four, and is charged a premium of TRY855 (US$232) if he is from Istanbul. If he caused an accident in the first year, his premium would increase by 50%; the premium would rise by 100% if he caused another accident in the second year; and by 150% if he caused accidents for three consecutive years.
On the other hand, an accident-free driver receives a discount of 15% after the first year, 30% after the second year and 45% after the third year.
Now for at-risk vehicles with an accident-free record, the insurance premium discount rate will be 30% instead of 45%, 20% instead of 30%, and 10% instead of 15%. M
TRY1 = US$0.28