Atilla Benli, President of the Insurance Association of Turkey, met with the press to evaluate 2019 for the insurance and pension market and share the expectations for 2020. He shared his opinions about the recent developments in the market such as the foundation of Insurance and Private Pension Regulation and Supervision Agency (SEDDK) and BES.
Stating that effects of the rebalancing in economy has begun to be seen in the insurance market with the second half of the year, Benli said: “Insurance market has such a huge potential that our market can grow at any circumstance. As of October 2019, we have reached a production of approximately 54.5 billion TL, up by 24 percent over the same period of previous year. Non-life production reached nearly up to 46 billion TL, and life production approached 9 billion TL. Our market has managed to grow by 14.3 percent in real terms for the last 10 months, compared to the same period of previous year. During the same timeframe, real growth stood at 35.5 percent in life segment and 11 percent in non-life segment. Likewise, at the end of October 2019, overall premium production in takaful reached 2 billion 777 million TL with a growth of 61.2 percent over the same period of 2018. We have also had a better year compared to last year, in terms of profitability. As of the third quarter, technical profitability reached nearly 5.5 billion TL, up by 27 percent from 4.5 billion TL in the same period of last year.”

“Recent policies and precautions are promising for the development of our market”
Benli also said that insurance market had a critical importance for Turkish economy to continue growing. “With the aim of increasing savings and contributing to the development of non-bank financial market, our government has shown the importance attached to our market with policies and precautions announced for all the recent significant programs and plans. The process that began with the New Economic Approach, continues through 2019 Annual Presidency Program, 11th Developmental Plan, and New Economic Program. It has been really pleasing and promising for the development of our market to see that 2020 Annual Presidency Program also includes significant policies and precautions for our market. Our insurance and pension market will increase its contribution to capital markets thanks to policies and precautions announced towards strengthening the tendency of making long-term investments, increasing pension income of individuals, developing complementary health insurance, financial insurance products, catastrophic insurance products, and takaful, and increasing the reinsurance capacity of our country. It will finance investments by providing long-term funds required by the real sector and take a significant role in economic development,” he said. Adding that one of the most recent developments of the market in 2019 was the foundation of Insurance and Private Pension Regulation and Supervision Agency (SEDDK), he said: “The most important benefit of SEDDK is that it will be able to position itself closer to the market as an institution that can rapidly issue secondary legislation in required areas. SEDDK will take significant steps towards both increasing the insurance awareness and reinforcing financial structures.”

Growth in BES will bring a more balanced financial structure and diversity for investments
Benli added that Individual Pension System is of vital importance in ensuring a better life for participants during retirement, in addition to its direct contribution to close the gap of savings-investment balance: “We have reached a fund size of 120 billion TL and 13 million participants in BES, including the Auto-Enrollment System. This is pleasing both for our market and our country; yet insufficient. On the other hand, development of pension market is directly related to the financial preferences of the household. According to OECD statistics for 2018, we are one of the countries where the household mostly prefers deposit and cash. If we can increase the savings made by households, it is possible to reach a more balanced structure in the financial market and encourage sustainable growth by providing fund diversity for the investments required for economic growth. 2020 Program refers to the precautions to be taken to ensure that participants save and stay longer in the system. Those precautions shall encourage participants who wish to leave the system due to cash problems to remain in the system for longer years. It will help participants make sufficient savings for their retirement period by ensuring that they do not leave the system until they retire.”

Reminding that 37 percent of participants leaving the system are at the age group of 25-34 according to the statistics by the Pension Monitoring Center; Benli said: “We see a significant positive discrimination is planned for young people considering the steps planned to be taken with the aim of increasing the duration young people stay in BES. This is an important development. Because it is important for young people to be saving for their retirement periods to ensure that they preserve their standards of living. We believe that more young people will be attracted to and remain in the system by differentiating state subsidies according to age as a result of the situation analyses and projections to be conducted.”

2020 target is to grow in non-auto lines

Undelining that the insurance market needs to grow in non-auto lines, Benli shared his opinions about insurance lines that would be popular in 2020 as follows: “In parallel with the growth trend in the economy, fire and natural forces, general losses and general liability lines may see some growth. Complementary health insurance is also supported by the government as it decreases the burden of health expenses. Considering its cheaper premiums compared to private health insurance and the wide private hospital network in Turkey, this product has the advantage of offering policyholders a meaningful solution. I estimate that complementary health insurance product will be more popular in 2020. Following the economic recovery, credit insurance and bond insurance will also gain some acceleration. Significance of cyber insurance products grows with each passing day. I believe penetration of this line will continue to increase throughout 2020. Life insurance will also continue to grow, in parallel with the expansion of loan usage. I expect developments in nursing insurance, as well.  And takaful will certainly keep growing.”

“We may become one of the major players in takaful”

Benli also talked about the developments in takaful in Turkey. He highlighted that total global premiums exceeded 20 billion USD in this line, and added as follows:
 “In takaful market, Saudi Arabia, Iran and Malaysia generate 85 percent of the overall takaful premiums. This total premium volume of 20 billion USD accounts for only 4 per thousand of total insurance premiums written all around the world. Considering the size of Islamic financial markets, we can clearly see that takaful has not developed enough despite the existing requirements and bears a great potential for growth. Analysts estimate that this market will reach a production of 43 billion USD by 2023, too. In recent years, ethical banking has been developing rapidly in Continental European Countries and other developed countries such as the UK, USA, Canada and Australia. As an extension to this development, we see that takaful has begun to be preferred not only by Muslims but also non-Muslim people due to its structure that is based on ethical values. Though it is a relatively new area in our country, takaful is developing rapidly in Turkey. Social cooperation is one of the most important values of our society. In this sense, I estimate that takaful will continue to grow in the coming terms. We can become one of the major players of takaful, just like Malaysia or Indonesia. First statistics concerning takaful began to be announced as of 2014. Overall premium volume, which was recorded as 2.2 billion TL in 2018, reached 2.8 billion TL at the end of October 2019. This only shows the results of the first 10 months of this year. As we increase the potential higher and diversify the distribution channels, we will be able to reach more people with takaful products in parallel.”