Digital Insurance in Turkiye

I have been following the rapid developments in Digital Banking both in the World and in Turkey.

According to a news I read, the number of companies applying for a Digital Banking license in Turkey in the first months of 2023 reached 35.

What is Digital Banking? What kind of legislation does it have?

In the Regulation on the Operating Principles of Digital Banks and Service Model Banking published in the Official Gazette No. 31704 dated December 29, 2021;

“Digital bank: Credit institution that provides banking services through electronic banking services distribution channels instead of physical branches,”

It is defined as .

Digital Banks provide their services to their users over the internet, without having a physical branch.

The minimum paid-in capital amount required for the installation has been determined as 1 billion Turkish Liras, paid in cash, however, BRSA has the authority to increase this amount. Credit customers of digital banks can only consist of financial consumers and SMEs.

Some well-known Digital Banks serving abroad

-Chime,
-Revolut,
-Monzo
-N26

Institutions that received digital banking operating permits in Turkey

-Hayat Katılım Bankası A.Ş.
-Kasa Katılım Bankası A.Ş.
-TOM. Participation Bank Inc.
-FUPS Bank A.Ş.
-Colendi
-Ziraat Dynamic
-Turkcell

Enpara (QNB Finansbank) and CEPTETEB (Turkish Economy Bank) provide services through the licenses held by their traditional banks.

Although these companies have been given a digital banking license, there are no digital banks that have started operating yet. (As of 10.09.2023)

Based on the official definition of Digital Banking above, in international literature;

Digital insurance can be defined as “Online tools and platforms that use technology to improve internal operations while providing customers with efficient and personalized insurance services.”

Digital insurance solutions

It allows customers to carry out all their insurance transactions through digital processes.
It offers a user-friendly and personalized customer experience.
It simplifies policy administration, claims processing and customer service.
It increases operational efficiency with technology and data analytics, ensures faster transactions and reduces costs.
It helps insurance companies stay competitive by increasing customer engagement, brand loyalty and market share.

Digital insurance models offer speed, agility, easy accessibility and a user-friendly interface. This digitalization enables the creation and implementation of newer and better services.

Digital insurance service providers have the following differentiators:

-Customer first approach,
-An information source where potential customers can research and understand the brand without speaking to a representative.
-Insurance technology ecosystem where pricing, risk assessment and claims handling are done through open, connected software platforms,
-Insurance products that can be customized according to need
-Some companies operating in Digital Insurance in the world

Lemonade,
Esurance,
Oscar Health,
Insurify,
Metromile,
Everquate,
Next Insurance,
Root Insurance,
Corvus Insurance.

Digital Insurance Examples in Turkey

As far as I can see, Turkcell Digital Sigorta A.Ş. It was established with a capital of 175 million TL.

Although Hepiyi Sigorta and, to some extent, Quick Sigorta, operating with their existing licenses, are companies that have made significant progress in this field, we are still at the beginning of the road in terms of both legislation and implementation.

I know that there are sub-applications in our large insurance companies, but there is no exact example that we can call Digital Insurance yet. (Note: If you have different projects, I would be happy if you share them with us in the comments.)

Benefits that digital insurance companies can obtain

Going Beyond Customer Expectations
Positive Consequences of Using Big Data
Reduced Costs
Better Employee Experiences
Leverage lower code capabilities instead of high Compute development costs
How to Implement Digital Insurance?

First of all, there is a need for legislation. Although we generally follow the legislation and practices in the digital world in our country, the legislation in this field abroad can be transferred in accordance with the conditions of our country, paving the way for digital insurance and providing guidance.

We can list the technological infrastructure that enables companies to be successful in digital insurance as follows:

Artificial intelligence
machine learning
internet of things
Big Data and Analytics
Software as a Service Features (SaaS)

Based on the definition of Digital Banking, SMEs and Individual customers as customer segments will be the target customers of Digital Insurance.

You may say that Digital Insurance as aggregator in Turkey was not as successful as it was once ambitious. This does not mean that it will not be successful eventually.

A process that starts today will provide an advantage over competitors. If we are not ready, an international company that is ready will eventually enter our market and be successful in this business.

Moreover, you can follow the development of classical insurance from the change in market shares in the last 10 years.

It is beneficial to try to adapt to the world and the age without resisting or wasting time.

Turkish Insurance Sector on the 100th Anniversary of the the Republic of Türkiye -5

Main Challenges and Opportunities

The year 2023 started with challenges for the insurance industry. The following are some highlights:

  1. The premiums rising due to high inflation and technical losses in the motor branch taken over from the previous years caused some customers with a low loss ratio to exit the insurance system.
  2. It is estimated that a sectoral loss of approximately 5 billion USD total cost of insurance and reinsurance companies) occurred in the SouthEast region of Turkey on 06 February 2023 due to the devastating earthquake damage that affected 11 cities, excluding the losses in the motor branch. (Aon, 2023)
  3. Due to the high MTPL loss/premium ratios, insurance companies are reluctant to issue policies despite many new regulations of the regulatory and supervisory authority (SEDDK), and there is no insurance company keen to issue TPML policies, which is a compulsory product.
  4. In addition, the earthquake that occurred on February 06, 2023 increased the concerns for the insurance sector players (specially reinsurers) about the consequences of the upcoming great Marmara Earthquake.
  5. There will be a shrinkage in both life and non-life premium production in the bancassurance channel due to bank loans falling and coming to a halt due to rising interest rates and contraction-oriented inflation reduction policies.

Main Opportunities:

1. In 2022, population for Turkey was 85.3 million persons. It increased from  1973 to 2022 growing at an average annual rate of 1.66%. (Source https://knoema.com/atlas/Turkey/Population, September, 14th)

2. As of 2022, the median age of the Turkish population is 33.5 years (up from 28.3 in 2007).  (Source https://en.wikipedia.org/wiki/Demographics_of_Turkey, September, 14th)

3. With the effect of rising interest rates, improvements are observed in the Financial Revenues item in P&L of 2023 compared to previous years.

4. Adjustments were made in line with inflation in earthquake/property  (fire) and health branch premiums. Except for MTPL in 2023, there will be a significant improvement in the technical profitability and bottom line figures of the sector in general.

5. Turkish GDP is approximately 1 Trillion US dollars. With insurance sector’s very low share in GDP (around 1,3%) when compared to the World figure (around 7%), the Turkish insurance industry still keeps its potential to grow.

6. Very well regulated legislation in line with European Union Legislation.

7. Huge potential for Digital Insurance. (i.e.: Almost 82% of the population are internet users)

 

Turkish Insurance Sector on the 100th Anniversary of the the Republic of Türkiye -4

Lines of Business Distribution

Lines of Business distribution for the last three years is given in Table 1.5. Sickness/health, motor own damage, motor liability, general damages and fire and natural disasters have shared since the last three years.  43% of  total non-life insurance premiums motor business, total of motor own damage and motor liability.

Table 1.5 Turkish Insurance Industry – Gross Premium Production per LoB

(Billion TL) 2019 % 2020 % 2021 %
Non-Life Total         57.442           100,0         68.152           100,0         87.599           100,0
Motor Liability            18.613                32,4            20.494                30,1            23.324                26,6
Motor              9.319                16,2            10.738                15,8            14.289                16,3
Fire & Natural Disasters              8.357                14,5            10.586                15,5            14.050                16,0
Health              8.300                14,4            10.096                14,8            13.078                14,9
General Damages              5.836                10,2              7.962                11,7            11.037                12,6
Casualty              2.369                 4,1              2.237                 3,3              2.443                 2,8
Public Liability              1.698                 3,0              2.190                 3,2              3.217                 3,7
Transport                922                 1,6              1.204                 1,8              1.844                 2,1
Other              2.027                 3,5              2.646                 3,9              4.315                 4,9
Life         11.359           14.431           17.768  

Source: SEDDK (2021). Annual Report About Insurance And Prıvate Pensıon Actıvıtıes Retreived from  https://www.seddk.gov.tr/upload/doc/2021-sigortacilik-ve-BES-faaliyet-raporu.pdf . December 10, 2022.

Turkish Insurance Sector on the 100th Anniversary of the the Republic of Türkiye -2

Number of Companies (with International Partners)

As of December 31, 2021, a total of 65 insurance and reinsurance companies operate in Turkey, including 41 non-life insurance companies, 15 Life & Pension and 6 Life insurance companies and 3 reinsurance companies. Turkish insurance market attracts international investors with its expected potential; 41 international insurance company, hold 57,9% of total paid capital and 51,8% of premiums. But local companies established recently have been decreasing their share since 2019 (Table 1.2) (SEDDK, 2021).

Table 1.2 Number of Companies with International Partners

2019 2020 2021
No.of Active Companies 63 63 65
No.of Company International 41 40 41
International Partner >%50 37 36 35
International Partners Share in Paid Capital (%) 62,2 58,6 57,9
Non-Life 64,0 58,7 57,4
Life/Pension 57,7 58,3 59,2
International Partners Share in Premium (%) 55,2 51,9 51,8
Non-Life 55,9 51,7 50,7
Life/Pension 52,2 52,5 56,4

Source: SEDDK (2021). Annual Report About Insurance And Private Pension Activities Retrieved from  https://www.seddk.gov.tr/upload/doc/2021-sigortacilik-ve-BES-faaliyet-raporu.pdf . December 10, 2022.

The industry provides a guarantee of 234 billion TL with an asset size of 430 billion TL and 200 thousand employees together with its intermediaries and assumes the obligation to pay 63.4 billion TL for the claims incurred in 2021 (SEDDK, 2021).

Turkish Insurance Sector on the 100th Anniversary of the the Republic of Türkiye -1

 

Turkish Insurance Industry Overview

Insurance sector, which has existed in our country since the end of the 19th century, is crucial for the economy and stable growth, with its economic value more than forty times the Gross National Product itself.

Insurance in Türkiye was initiated in 1872 by the representative offices of British insurance companies. After the British insurers, the French insurers also showed interest in Türkiye and in 1878 the first French company launched its operations. Further, insurance activities expanded with the entrance of insurance companies of foreign countries such as German, Italian and Swiss to the market. Although these companies provided required quaranties to the insured, they were operating completely unsupervised at that time due to the absence of laws envisaging the establishment of insurance companies and regulating insurance activities, or even a provision addressing this issue.

In 1893, the first domestic insurance company was established with the title of Ottoman Public Insurance Company. With the changes made in the laws in 1908 and 1914, foreign companies were tried to be controlled. With the law of 1914, foreign companies were required to provide collateral and pay taxes.

“Anatolian Turkish Insurance Joint Stock Company” was established by İş Bank, on April 1st, 1925 (Özbolat, 2010: 39). Following this important development, “National Reinsurance Company (Milli Re)” was established in 1929, and a local reinsurance monopoly started. (Uyar, S.,and Uyar,2012). Since then, the Turkish Insurance sector has practiced many laws and regulations. Industry lived through a tariff period in which prices were fixed, which would last until 1990. The first Insurance Law No. 5684, which is still in effect, was published in the Official Gazette dated 14 June 2007 and entered into force.

Due to the fact that our country is an earthquake zone, with the number of vehicles in traffic increasing rapidly, especially in big cities, the risk of accident increased so much that individuals cannot carry them, insurance applications go beyond being a guarantee of assets, and with the development of products and services for the sustainability of commercial activities such as credit and performance insurance, attractiveness of pension funds for the economic stability, increased the state and people’s sensitivity to insurance. The reflections of the harmonization laws enacted years before in the process of integration with the European Union on risk management, insurance and social security issues have also gained great importance.

The Turkish insurance industry shrank significantly as a result of the economic crisis in 2008, but started to recover as of 2009 and entered a period of high-rate real growth with the reduction of the effects of the crisis. Direct premium production in the sector increased by 15% in real terms in 2013, about eleven points above the GDP. The increase in premium production in 2013 is the highest rate recorded in the last five years. However, the sector showed 7.3% nominal growth in life and non-life total in 2014, and could not achieve real growth for the first time in years (SEDDK, 2008 to 2014). As Table 1.1 demonstrates, between 2015 and 2021 premiums in US dollars could not grow, and share in the World Insurance Market decreased from 0.25% to 0.15%. With its very low share in GDP (around 1,3%) when compared to the World figure (around 7%), the Turkish insurance industry still keeps its potential to grow.

The increase in consumer expectations and the widespread use of technology in the insurance sector created a more conscious customer profile. Companies adopted approaches that focus on new customer acquisition, customer retention and customer value in order to achieve sustainable profitability that accelerated the delivery of fast, practical and creative solutions that are suitable for changing consumer expectations compatible with the digital world (Kurtulmuş, 2018).

Table 1.1 Turkish Insurance Industry – Direct Premium Figures in US$

  2015 2016 2017 2018 2019 2020 2021
Mio US$              
Non-life Premium 9.800 11.400 10.200 9.000 9.244 8.765 8.645
Life Premium 1.400 1.600 1.900 1.400 1.689 2.039 1.881
Total Premium 11.100 13.100 12.100 10.500 10.933 10.804 10.526
Non-life Share (%) 88,29 87,02 84,30 85,71 84,55 81,13 82,13
Life Share (%) 12,61 12,21 15,70 13,33 15,15 18,87 17,87
Premium /GDP(%) 1,3 1,52 1,42 1,36 1,15 1,5 1,3
Premium Per Capita (US$) 141 164 149 128 131 128 124
Share in World Insurance Premium (%) 0,25 0,28 0,26 0,22 0,17 0,17 0,15

Source: SEDDK Annual Report About Insurance And Prıvate Pensıon Actıvıtıes (2015-2021). Retrieved from https://www.seddk.gov.tr/tr/raporlar, December 10, 2022.

Türkiye’de Dijital Sigorta

Son zamanlarda hem Dünya, hem de Türkiye’de Dijital Bankacılık konusundaki hızlı gelişmeleri izliyorum.

Okuduğum bir habere göre Türkiye’de 2023 yılı ilk aylarında Dijital Bankacılık lisansı için başvuran şirket sayısı 35’i bulmuş.

Dijital Bankacılık nedir? Nasıl bir mevzuatı var?

29 Aralık 2021 tarih ve 31704 sayılı Resmi Gazete’de yayınlanan Dijital Bankaların Faaliyet Esasları ile Servis Modeli Bankacılığı Hakkında Yönetmelik’te;

“Dijital banka: Bankacılık hizmetlerini fiziksel şubeler yerine elektronik bankacılık hizmetleri dağıtım kanalları aracılığıyla sunan kredi kuruluşu,”

Olarak tanımlanmaktadır.

Dijital Bankalar, fiziksel bir şubesi bulunmadan, hizmetlerini internet üzerinden kullanıcılarına aktarmaktadır.

Kurulum için gerekli olan asgari ödenmiş sermaye tutarı, nakden ödenmiş olmak üzere, 1 milyar Türk Lirası olarak belirlenmiştir bununla birlikte, BDDK’nın bu tutarı artırmaya yetkisi bulunmaktadır. Dijital bankaların kredi müşterileri, yalnızca finansal tüketicilerden ve KOBİ’lerden oluşabilmektedir. Okumaya devam et “Türkiye’de Dijital Sigorta”

Kasko ve Trafik Primleri Düşecek

 

2017 model aracımı satıp yeni bir araç alayım diye otomobil pazarına bakınıyorum.

Neredeyse tüm otomobil markalarında elektrikli araç modelleri pazara çıkmış ya da çıkması bekleniyor. Elektrikli ya da hibrit bir araç almaya dönük eğilimim giderek artıyor.

Covid öncesi gittiğim Hollanda’da trafikteki araçların çok önemli bir kısmının, başta taksiler olmak üzere elektrikli olduğunu görünce çok şaşırmıştım. Çünkü o dönemde Türkiye’de benzinli araçlar hala çok popülerdi. Üzerinden 3-4 sene geçti, Türkiye’de de elektrikli araçlara ilgi arttı.

Bir taraftan varili 90 USD’ne çıkan petrol fiyatları, bir taraftan Mayıs ayından bu yana neredeyse iki katına çıkan benzin fiyatları ile insanların elektrikli araçlara ilgisi doğal olarak artıyor.

Türkiye Elektrikli ve Hibrit araçlar Derneği (TAHED) verilerine baktım. 2023 ilk altı ayında Türkiye’de 10.028 elektrikli otomobil ve 10 adet hafif ticari araç satılmış. Bu rakamlar az gelmesin. Arkadaş ortamlarında herkesin dilinde aracını elektrikli araç ile değiştirme projeleri yer almaya başladı bile. Hele Çinli bir firmanın 10 dakikada şarj olan pil tanıtımını gördüm ki, elektrikli araçlar çok hızla benzinli araçların yerini alacak.

Peki otomobil pazarındaki bu trend değişimi sigorta sektörünün yaklaşık %45’ini oluşturan kasko ve trafik branşlarını nasıl etkileyecek?

2018 yılında bir Tesla aracın motor kaputunu açtığımda şok olmuştum. Araçta motor yoktu. Sadece bir küçük bir elektrik motoru vardı. O da ufacık bir yer kaplamıştı. O an, elektirikli araçlar kaporta hasarları dışında servis ihtiyacı gerektirmeyecek diye düşünmüştüm.

Hasar anında aracın tamiri için motor aksamına para ödenmeyecek. Motor aksamı da aracın maddi değerinin en önemli kısmını oluşturuyor. Örnek: 2023 yılı tarifelerine göre bir aracın komple boyama maliyeti 15.000 TL gibi gözüküyor. Araç değerleri 1 milyon TL seviyesindeyken komple boyama 15.000 TL.

Yedek parça (orijinal, ikame, çıkma) sorunları da ortadan kalkacak. Durum böyle olunca kasko ve trafik poliçelerindeki primler nasıl etkilenecek? Bedeni hasar ve mali sorumluluk, hadi yanına değer kaybını da koyalım, bugünkü kasko ve trafik primlerine sektör olarak ulaşılabilecek mi?

Farkı karşılamak için ne gibi yeni ürünler düşünülmeli? Yakın zamanda Anadolu Sigorta ve Aksigorta’nın elektirikli araç sahiplerine hitap eden ürünlerini görmeye başladım. Eminim diğer şirketlerde de benzer çalışmalar yapılıyordur.

Yapılsa da iyi olur. Sektörün en fazla nakit girişi (cash cow) sağlayan, şirketlerin satmaya çabaladığı değil, müşterinin almayı istedikleri  ürünlerde prim açısından değişimler geliyor.

Hazır mıyız?

Reasürörler Teminat Vermek İstemezse

Bu kez üzümlerimizi toplamak amacıyla Ürgüp’e geldik. Akşam kısa süre içinde o kadar yoğun yağmur yağdı ki ben daha önce benzer şiddetteki yağışı çok seyrek gördüm.

Tam Küresel Isınmanın sonucu bu diye düşünüyordum ki yurt dışında yaşayan sigortacı meslektaşın gönderdiği makale mailime düştü.

Küçük Bir Firma Grubu Doğal Afetlere Karşı Sigortalamanın Matematiğini Nasıl Değiştirdi? (How a Small Group of Firms Changed the Math for Insuring Against Natural Disasters By Emily Flitter Published Aug. 16, 2023 Updated Aug. 21, 2023)) başlıklı makale.

Makalede özetle;

“Reasürans şirketlerinin sene başından bu yana sadece ABD’de yaşanan doğal afetler (Orman yangınları, büyük fırtınalar) için 40 milyar USD hasar ödediklerini ve bazı sigorta şirketlerinin belirli bölgelerde teminat sunmaktan geri çekildiği veya onarım için ödenecek teminatları durdurduklarını açıkladıkları,” ifade ediliyor.

“Reasürörler yenilemelerin yaklaşık %50’sinin yapıldığı 01 Ocak yaklaşırken fiyatların arttığını sigorta şirketlerine bildirmişler bu durum sigortacılar ile reasürörler arasında gergin müzakerelerin başlamasına yol açmış.”

“Dünya ısınıyor; fırtınalar şiddetleniyor; enflasyon bir felaketten sonra yeniden inşanın maliyetini artırdı ve faiz oranlarındaki küresel artış paranın kendisini daha pahalı hale getiriyor. Riske karşı korunmanın maliyetleri her düzeyde artıyor ve büyük şirketlerin liderlerinden ev ve küçük işletme sahiplerine kadar herkes baskıyı hissediyor.”

Okumaya devam et “Reasürörler Teminat Vermek İstemezse”