News Middle East10 Feb 2021

Turkey:Insurance association says motor compensation sums are to be calculated based on General Conditions

| 10 Feb 2021

The Turkish Insurance Association (TSB) has said that insurance companies are to make compensation calculations for motor third party liability insurance business in accordance with the General Conditions of Highway Motor Vehicles Compulsory Financial Liability Insurance.

The association made this statement following reports of uncertainty over how compensation amounts are to be calculated following the Constitutional Court's decision to annul some articles of the Highways Traffic Law, according to a report in Insurance Gazette.

Last July, the Constitutional Court annulled some provisions of the Highways Traffic Law regarding the General Conditions of Highway Motor Vehicles Compulsory Financial Liability Insurance. Essentially, the Court annulled some provisions of the Law regulating the determination of the compensation within the scope of compulsory liability insurance according to the General Conditions.

The Court's decision was published in the Official Gazette dated 9 October 2020 and since then, there has been some uncertainty over claim compensation calculations by insurers.

The issue surrounds the General Conditions set out by insurers in the insurance policy versus provisions of the Turkish Code of Obligations [TCO] regulating tort. The question is whether compensation is to be determined according to the TCO or in accordance with the General Conditions because there is a difference between the compensation calculated between the two.

Although the Constitutional Court's annulment is not retroactive and will not affect compensation cases closed before the Court ruling was made, the TSB expects that there will be an increase in legal suits by policyholders against insurers, because the uncertainty has prompted policyholders to file appeals with the courts in the expectation that they would receive more compensation on the grounds that the claims compensation has been under-calculated.


The TSB says that the Insurance and Private Pensions Regulation and Supervision Agency (SEDDK) has clearly emphasised that the General Conditions of Traffic Insurance are in force. In this context, insurance companies are to make their compensation calculations in accordance with the General Conditions in force.

The TSB said, “We need to emphasise that the decision taken by the Constitutional Court is an issue regarding the method of lawmaking, and is not a decision regarding the annulment or suspension of the General Conditions of Traffic Insurance.

“As it is known, the main contents of insurance contracts are drawn up in accordance with the General Conditions in force regarding the relevant coverage.

“The Insurance Law explicitly entrusts the authority to regulate the General Conditions to the administration.” .

Court's annulment of provisions could lead to increase in claims and premiums

Motor third party liability insurance business is expected to see an increase of 10-20 points in the damage/premium rate in the wake of the Constitutional Court's ruling, says the TSB.

The association says that this estimate is based on an economic impact analysis study conducted with data collected from insurance companies,.

The TSB notes that while some parties have expressed their opinion that the calculation methods specified in the General Conditions will continue to be applied, cases challenging this position have been taken to court. The rulings made so far by the courts and the Arbitration Commission in the cases brought before them show that the calculation methods in the General Conditions are not applied in every ruling.

The TSB nevertheless says that although these various court decisions may cause indemnities to increase and discounts to be lowered, motor third-party liability business will stabilise soon.

Industry sources have recommended that the insurance law be reformed to eliminate the uncertainty.

Motor third-party liability insurance business accounts for nearly 30% of total non-life premium income. Developments in this branch have a significant impact on non-life insurance companies.


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