Turkiye: Traffic insurance losses mount in first nine months

Source: Middle East Insurance Review | Jan 2023

The insurance sector posted total profits of TRY6.115bn ($328.2m) in the third quarter of the year, according to the Insurance Association of Turkiye.

This represented a 17% fall in profits compared to the corresponding quarter when profits in the sector amounted to TRY7.338bn.

In the July-September quarter of 2022, while the insurance sector made a technical profit of TRY3.225bn in the comprehensive motor insurance branch (3Q2021: profit of TRY916m), the compulsory motor third-party liability insurance branch reported a loss of TRY7.907bn (3Q2021: loss of TRY897m).

Data for the last 10 years showed that the financial results reported in compulsory traffic insurance were illustrated in Table 1.

Profit/loss of compulsory traffic insurance in last 10 years

High inflation, increases in the minimum wage and a weaker Turkish lira have added to cost pressures, and consequently, losses in compulsory insurance.

Curbing losses

In November 2022, the industry regulator, the Insurance and Private Pension Regulation and Supervision Agency (SEDDK), announced its roadmap to correct the structural problems in compulsory traffic insurance.

The roadmap includes the introduction of two new rungs in the tariff system of compulsory traffic insurance, increasing the number of rungs from seven to nine. The two new rungs are for ‘very risky drivers’ and ‘very good drivers’.

Those who are in the seventh rung and have not caused an accident for five years will be considered very good drivers and will move to the 8th rung. They will receive a 50% discount on motor premiums.

Those defined as very risky drivers (rung ‘0’) will pay a surcharge of 200% on their motor premiums.

Turk Nippon Sigorta’s deputy general manager Emrah Balkan told Insurance Gazette that the motor tariff system should be abolished. He said, “We believe that to ensure the sustainability of traffic insurance, a free tariff regime is needed.”

He added that if it is not possible to liberalise traffic insurance pricing, there is a need to segregate drivers who are considered high-risk from other drivers so that more appropriate pricing can be set. M

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