Kategori: English Posts

After I posted my article  “Do Not Buy Iwc Pilot Top-Gun Because It is Broken” in my personal blog, one of my readers gave me the name of an authorized person from Schaffhausen and we have started a discussion about my complaint on my broken Top-Gun seramique watch. I’d like to thank  him as he shows extra effort to solve my problem. But I think he will not be able to solve it.

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In order to understand that it is not my fault but it is Iwc’s product’s defect he recommended me to give my broken watch again  to their service. This will be the second time that I will send it to service. First investigation had taken nearly two months and their comment about my broken watch was that “ the damage was due to an impact which is not covered by warranty.”

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I am a white color, office worker, an insurance proffessional and I have more than10 watches and I use them in a circulation. Only Iwc Pilot Top-Gun with seramique parts was broken without any spesific incident.

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One of my favorite movie series is Bourne Theory. And when I started to watch last Bourne movie which is “Bourne Legacy”, I saw a scene that schocked me. Last Bourne star was wearing  Iwc Pilot Top-Gun when he was on wild nature.

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I learnt in my experience that Iwc Pilot Top-Gun can be broken even at office. How it may show resistance to mountains and hard natural environment?

Doesn’t it decrease the reality of the Bourne stars roles at the movie?

An old colleague reproached me the other day: We could not and will not be able to find the same working environment that we had together. We realized that, that was an exception, the working life is not like that in general, and we could not be happy after that company any longer, she said.

So, I decided to list the issues that I am sorry about and to apologize from my ex-colleagues for setting these as the company culture.

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I’m sorry because:

-We managed the company through a committee that we established,

-I enabled information flow from top to bottom in such a way that there was no room for gossiping,

-I gathered all employees together and informed them even in hard times, including acquisition period,

-I sent e-mails to all employees once a month, as company CEO, informing them about the company’s financial standing and performance,

-We arranged feedback meetings with managers on a quarterly basis about what we did right or wrong,

-We never left any subject vague,

-We arranged “vision” meetings once a year where we provided information to all employees about what we did, what were the mistakes, what we plan to do the following year, etc. and then had a party where everybody had fun until the next morning,

-We arranged a reward ceremony once a month for employees who made positive contribution to the company,

-We distributed the performance targets to all employees and evaluated them based on the same criteria,

-I did not locate the CEO’s room on a separate floor, and never kept it close,

– I made motivation tour on floors and patted my colleagues on their backs everyday,

-We made it the company culture to interfere in whatever is not right and fight with it until it is corrected

-I had conversations with each and every employee on life,

-I showed to people that sometimes you should just leave, because nothing is more important than “working happy”,

-We encouraged conflicts to achieve best business results, and never allowed any other conflict,

– I never hesitated to put my signature under any decision,

-We always encouraged innovation with excitement and faith,

-I encouraged people to take responsibility at work, and once something is done, I always stood by them until the end,

-We tried to make office life attractive for the employees where they spend a majority of their daily life,

– We brought musicians to play on the floors on the Women’s Day,

-We transformed the working place into a place of sympathy and respect,

-I always gave the message “to stand together” to my colleagues,

-And for many things else that I can not remember now,

I’m sorry.

You get used to these things very quickly and start believing that every place and every time it is the same, but you can not easily find these things at other places and times.

We are observing with excitement the entry of one digital distribution channel after another into the world of digital insurance in the recent days.

Direct insurance companies, brokers, agencies, insurance portals. And now, a Bank has carried its insurance activities to the digital space.

Aktif Bank has launched a web site called sigortayeri.com 

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Aktif Bank is a bank that makes successful use of alternative distribution channels in banking. Instead of increasing the number of its physical branches, they create successful applications of alternative distribution channel solutions.

They have now added “alternative insurance” to their differentiated approaches.

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In the website;

• The products are offered under the headings MTPL, Motor Own Damage, TCPI, Home, Personal Accident, Emergency Health, and Special Products for You.
• The Customer Value Offer is very clear:

                                         -Best price,
                                        -Anytime, anywhere,
                                        -7/24 Customer Support,
                                        -Claim Support Service,

• They work with 9 insurance companies.
• As far as I could see, it was designed as an online web service only – they aim to provide service also through Post Offices and through different locations with the help of the Business Partnership Program.
• The website is designed as a bright, easy to understand and one that requires little information exchange.

On the other hand;

• The presentation stile that is favored by the digital world, such as animation or a sympathetic character that carries “humor”, was not used. It looks a little distant from the “in“s of the digital world at first glance.
• It is a curious matter how they will bring together the current insurance legislation and the “Business Partnership” program. I hope they will be successful in this respect and contribute to the expansion of the insurance pie to the base.
• “Neova Sigorta”, which is used as an example under the heading “How Do I Get Insured”, is not one of the insurance companies that is listed on the main page.
• However, I believe they will be making many improvements in time as the site is brand new at the moment.

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I wish all the success to Aktif Bank and the sigortayeri.com team who have opened a new page in insurance.

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I may not have an objective view in this, but, I believe that www.sigortadukkanim.com is still number one among the alternatives in terms of reflecting the colours of the retail world and customer point of view into its processes.

Let’s see what innovations will come up in the digital world in the coming days.

Before 2012 is over, and less than a year after my blog post titles “Is Insurance Direct Coming to Turkey?”, I found out that Aviva Sigorta made a silent entry into the direct market through its web site “Artiksirasende“.

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• The site is beautiful in terms of colour and design. The transactions are easily explained through animation, the widespread marketing tool of the internet world.
• The expectations of internet users regarding “being rewarded however small” is being fulfilled.
• They are trying to market motor own damage and MTPL policies together and those who buy motor own damage policy online will get a 5% discount if they also buy the MTPL policy online.

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It’s brand new and there are areas still to be further developed.

Example: The system is still not a fast-flow process for the end-user. I believe that developments are needed especially in the proposal page by close monitoring of user experience.

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My favourite feature: The freedom of the user to design the motor own damage policy according to his/her needs

What I wonder; whether the motor own damage policy content and price is different from that of what the agency sells.

However, in any case, I congratulate and wish all the luck to the management of Aviva Sigorta who have shown the courage of bringing Direct to Turkey in a real sense.

One company was going to lead the bringing of Insurance Direct to Turkey. I think that the other players will be faster and braver to head towards the direct market from now on.

It is best to investigate “how to become a part of this new world” for all the players – not trying in vain to stop the process.

Today, on one of the economy channels; when they were discussing the Istanbul Stock Exchange performance, in contrast to many other sectors,

 •They mentioned that the insurance sector shares were negatively separating and thus falling.

 As an insurer, I was upset.

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 Right after this, Mr. Erdem Başcı, the President of the Central Bank, mentioned in his speech;

 •They were about to finalize the sharing of credit ratings of customers with other institutions.

 Again, as an insurer, I was happy with this news.

Because, I know that the credit rating information is used very effectively in motor insurance pricing in many countries, especially the USA.

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The market is producing technical loss in motor insurance.

According to the 9-month results, the market has a technical loss of;

•102.145.406 TL in motor own damage,

•651.783.926 TL in MTPL.

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I am observing a lot of positive development for the compensation of these losses. For example, I know that the risk selection and modelling of companies is based more and more on “detailed data”.

In order to see how these efforts are reflected in product prices, from the data of Turkish Insurance Association, I tried to extract the quarterly development of average prices (*) in motor own damage and MTPL between 2008 and 2012.

(*Average Price= Independent Quarter Premium/Number of Policies)

Result: Average premium in Motor Own Damage and MTPL is increasing.

Banks, when transferring the right to use their distribution channel in non-life insurance to an insurance company, can reach more efficient results if they work through a panel in which at least three insurance companies are present in motor own damage insurance.

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The non-life premium production was TL 11.958.051.653 in Turkish Insurance Sector as at end of September 2012.

TL 1.691.490.959 (14.5%) was produced through banks.

Source: TSB Statistics.

 In the meantime, while the motor own damage premium production under the branch “Land Vehicles” was TL 3.250.782.577, the share of banks in this LoB was limited to 8.15% at TL 265.050.951.

Whereas had they reached 14.15% in this branch too, they would have produced TL 460.000.000.

The average commission in this branch amounts to 15%.

This means that the banks lost at least TL 3 million in commission only in the first 9 months of this year.

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It seems that banks can not reach the same sales success as other distribution channels of the insurance sector in the motor own damage branch, which constitutes 27.5% of the market.

Why?

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Insurance companies price casco policies based on their own statistical pools and past track record. Even though many criteria is included in this pricing, all companies take the past loss/premium ratio in their own statistical data as the base.

Hence, companies offer very different prices to vehicles and customers.

Casco is the most well known and price sensitive insurance product. The customer always want to get a quote from more than one company and purchase the cheapest.

Banks, on the other hand, offer the “casco price” of only the insurance company with which they have an exclusivity agreement.

As a result, while they are producing 14.15% of the total production, they remain limitied to 8.15% of casco production.

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Starting especially from 2007 onwards, many banks have sold their non-life insurance subsidiaries or the right to use their distribution channels. Very high figures were reached in terms of selling price.

· While it became an important gain to “work exclusively with the most efficient bank distribution channels in terms of personal and small business segments” from the perspective of new investors or insurance companies who own distribution channels,
· It was also equally important from banks to get a considerable upfront payment for the agreement period.

Besides, the banks continued to get commission payments for the insurance sales during the exclusivity period.

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The only variable that does not work right in this formula is the “casco branch” due to the reasons I summarized above.

Recently, the Istanbul Stock Exchange Index is rallying toward a record with the expectation of a possible “country rating upgrade”.

But, how would the upgrading of the country credit rating to “Investment Grade” effect the players of the Turkish Insurance Market?

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In 2003, one of my friends, who owned one of the nice butique hotels of Urgup, was asking 2 million USD to sell his hotel. In 2012, the price was10 million USD for the same hotel.

The hotel was the same hotel, the revenue (in terms of USD) was more or less at a similar level.

Difference;

• There are more liquidity and more buyers in the market.

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It is a certainty that more money will flow to Turkey in the case of a possible rating upgrade. It is also certain that cheaper funds will be available for new companies to be established in the country, but the foreign investment will flow more to the already established businesses.

While the existence and the number of these companies in the country is known, how will the increase in demand to acquire or investment in these companies effect the market?

The value of the companies will increase quickly despite the fact that there will not be any changes in their operations. A company with a market value of 1 million TL will be worth 5 million TL or 10 million TL shortly with the increasing demand and liquidity.

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The increase in value will not be limited to those companies; it will spread to all sectors, goods and services, and will continue until a new and higher demand/supply balance.

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The negative consequences regarding rating upgrade mentioned below should be considered alongside the positive expectations that is created these days in the financial markets.

In Brazil, following the credit rating upgrade, the interest rates seemed attractive to investors and the Direct Foreign Investment increased to 66.7 billion USD in 2011 from 48.5 billion USD in 2010. (*)

With the quick increase in foreign investment, the Brezilian currency appreciated against USD, resulting in a decrease in the competitive advantage of this country (in exports and production), and as a result, the Brezilian Government felt the necessity to impose new taxes as a protection against the negative consequences of increased cash flow.

(*)Source: CIA The World Factbook.

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Wıth the upgrade of the country credit rating, short term effects on the insurance industry can be expected as follows;

• The increase in insurable value of goods & services will primarily increase premiums and consequently claims costs,
• Values of companies in the insurance market (insurance companies, brokers, agencies) will also increase,
• More companies will find new buyers,
• Despite increase in personal wealth of some individuals, the purchasing power of the new value created at the higher price level will weaken.

In my opinion, the worst case for companies and individual could be to be in full liqudity  instead of all other kind of investment in such an upgrade.

When we look at the financial results of the non-life insurance sector, we see that although there are growth rates that make the counterparts at the developed economies jealous, the technical losses are becoming unbearable for the companies, especially in motor LoB’s.
 
Even companies which used to profit in these LoB’s in the past and are generally seen as role models by other companies have announced losses in motor third party liability.
 
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When we read the interviews of the executives, we understand that the losses are distribution channel specific and most companies are in a continuous search for a bank channel.
 
On the other hand, when we look at the market, we see that the larger bank channels are occupied and the remaining ones are either small or medium sized. Independent than their size we always hear that multiple companies compete to use these channels.
 
Then, how are those companies that don’t have a bank channel (or has one that is insufficient for their needs) supposed to find a cure for their un-profitability problem?
 
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My idea is that most of the companies in the market have already started their preparations. They are working to start selling “direct” through the internet. Direct channels will enter our lives very soon. This is because, in the current situation, the insurance companies do not seem to have any other solution.
 
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What should the agencies, which amount to 16.000, do about these developments?

They should keep pace with the change, and switch to use of high technology with higher capitals. They should stop losing time in their fight for commission with the insurance companies, start consolidating, join their forces (in terms of capital and know-how), and focus on the retail customer segment which is not yet sufficiently saturated. They should target a “tech-intensive” structure instead of a “labor-intensive” structure to achieve this.
 
While the situation of the insurance companies becomes inextricable, the fact that the agencies continue to look into the future with the old strategies will only lead to a loss of time.
 
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The insurance company executives don’t have room to maneuver anymore. Tomorrow, if not today, we will find ourselves in a new insurance market with radical solutions.
 

I noticed a news story in a newspaper dated August 15, 2012.

One of the new regulations (it is a draft now) regarding consumer protection that will become effective in 2013 is that “the banks will not force customers to make insurance a requirement for car and housing loans”.

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When issuing a car or a housing loan, banks that act as agency to one or more insurance companies ask or require their customers for:

• a motor own damage policy for car loans,
• a TCIP and fire insurance policy for housing loans,
• and a personal accident or life insurance policy for the credit customer,

with the condition that the bank itself is the beneficiary.

Although when you look from the outside, it looks as if the banks force customers for insurance with the main objective of obtaining fee income, the underlying purpose is to protect the loan and the customer. The worldwide practice is also the same.

From my own experience, I have seen many customers and/or their heirs benefiting from these insurance policies.

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I would like to extend this topic a little further.

Home Insurance (TCIP and Fire) Policies: It is well-known fact that our country, especially the Marmara Region is a high-risk earthquake region. It is also a fact that the mid-class citizens mainly finance their home acquisitions through bank loans.

Banks take a mortgage on these properties as collateral.

Although I hope it will never take place, in the case of a large scale earthquake, the damages to these properties will first and foremost cause damage to the credit customer.

He or she may no longer be able to reside in the house. It will be extremely difficult to cope with such losses. In fact, if he or she had sufficient financial means, the usage of a housing loan would not be necessary in the first place.

Because of the damage to the property, the bank will also lose its main collateral, and will have to look for other assets of the customers for the repayment; the customer who is already distressed due to the damage will risk losing other existing financial or physical assets.

Therefore, both TCIP (up to a certain limit) and home (fire) policies should accompany housing loans.

Telling banks not to require a customer for insurance will, in the end, cause the customer’s loan to become unsecures, which will sooner or later harm the economy as well.

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Motor Own Damage Policies: Like home policies, the bank utilizes a loan for the customer up to a certain percentage of his or her vehicle’s value.

In the absence of an insurance policy, the client, who needed a loan to buy the vehicle, will be the one who sustains the highest amount of damage in the case of an accident.

In case he or she fails to make the repayments of the loan while forcing his or her financial means to get the vehicle repaid, the loan will be subject to default procedures by the bank.

Especially if there is an injury or death involved with the accident, not only the customer but even the heirs will be negatively affected.

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Personal Accident or Life Policies: Who will benefit the most from the customer buying a life policy in all personal loans? (housing, car or general purpose)

Naturally, the customer and his or her heirs.

I have seen many examples where the heirs of a customer who was dead or injured, benefit from the claim payments of insurance policies in situations where they would otherwise not be able to pay by their own means.

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It could be argued that these policies could be sold by other distribution channels other than banks.

Surely, this is possible.

However, at that stage the banks start to have difficulties in tracking these policies:

• Is it renewed?
• Is the coverage frozen because the premiums are not paid?
•  Is the policy cancelled?

If these problems can somehow be solved, there is no problem. However, if these policies are to be sold in any case, why not by banks?

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In my opinion, banks are currently the healthiest and most efficient retail insurance distribution channel.

The above concerns should be taken into account when attempting to change the best performing system that not only protects the interests of the customer but also protects those of the heirs of the customer, the collaterals of the banks and the national assets of the country.