The insurance sector in Türkiye said the 25% tariff increase for compulsory motor TPL insurance (dubbed ‘traffic insurance’) that took effect on 1 June will not cover their costs, particularly as the coverage sum has also been increased.
In addition, increases to the minimum wage in Türkiye and other cost items continue to force insurers to increase reserves, reported Insurance Gazette.
Rising damage costs in traffic insurance, limited increases in premiums and the need for additional reserves have led to losses in motor insurance.
Statistics for April 2022 show that the inflation in motor insurance and compulsory traffic insurance (auto CPI) increased by 11.73% compared to the previous month (monthly), and by 135.5% compared to April 2021 (annual).
The increase in auto insurance costs in parallel with the meltdown in the value of the Turkish lira against the US dollar also negatively affects the financial results of insurers.
Last year, traffic insurance business posted a loss of TRY2.59bn ($157m) compared to a technical profit of TRY825m in 2020.
This year has so far also seen similar developments in auto insurance that directly affect costs. The impact of the weakening lira on spare parts costs and the increase in inflation hiked damage costs and the premiums received are not enough to cover the losses, insurers said. M