The new general conditions of Traffic Insurance determined by the Insurance and Private Pension Regulatory and Supervision Agency (SEDDK) were published in the Official Gazette on Saturday, December 4th. Regarding the arrangements made in many items, from disability insurance to spare parts details to be used in damage repairs, from death and disability compensation calculations to vehicle depreciation, Koray Erdoğan, Ray Insurance General Manager, presented his opinions and evaluations to a television channel on weekdays as a live broadcast program guest.

"I find the changes in the general conditions positive"

The general condition changes that closely concern insurance companies and insurers have had a great impact on the industry. Koray Erdoğan, General Manager of Ray Sigorta, is the first person to evaluate the arrangements made in the sector: “Considering it as a whole, I think that the general conditions laid down are in favor of the consumer and fair. As insurance companies, we should be providing real and full service to the party who is the victim of an accident. But in order to provide this service, we also need to get the necessary premium. Our critical point is whether we can get the right premium for these compensations.”

“There have been updates under three main headings”

He said “It seems that there are 3 main changes in the general conditions. The first of these is the use of original parts in material compensation. According to the previous general conditions, the use of equivalent parts was based on the use of original parts with the consent of the insurance company. With this change, it is now essential to install the original part. If the car owner gives his consent, insurance companies will be able to use equivalent parts. Unfortunately, it was not possible for consumers to understand different options such as equivalent, semi-equivalent, packaged equivalent. In other words, the confusion has been resolved with the consumer. Of course, this regulation will have an additional cost to the insurance companies, but I think this is the right regulation in favor of the consumer.” Referring to other regulations in detail, Koray Erdoğan continued his remarks as follows: “Another change is on the side of bodily compensations. Judicial and arbitration practices differed from each other. A standard has been established. Although it brought an additional cost to the sector, important arrangements were made in favor of the victims. All companies, actuaries, experts and arbitrators will use the same table, so there will be no big differences between the calculations. Contrary to the general belief, since the SEDDK reduces the discount rate with this regulation, there will be an increase, not a decrease, in the compensations to be paid by insurance companies. On the other hand, the scope of disability coverage has also expanded slightly. While the previous guarantee was referred to as ‘Permanent Disability’, along with this regulation, it was included in the general conditions as ‘Disability Guarantee’. Thus, the guarantee of temporary incapacity for work was also included in the scope of this policy. Even the caregiver's expenses were included in this coverage. This is a very important development, because insurance companies considered temporary incapacity for work as a guarantee that should be paid mainly within the scope of treatment and is the responsibility of the SSI. With the general change of conditions, it became clear that insurance companies are responsible for these compensations.”

“Advantageous regulations for the consumer in terms of setting standards”

Stating that the third, that is, the last main title is in the depreciation calculations, Koray Erdoğan, Ray Sigorta General Manage, said noting that this regulation is the change that will most increase costs on a proportional basis: “This arrangement brings a serious cost increase for insurance companies. On the other hand, a standardization of depreciation has been introduced. As you know, in Traffic Insurance, the insured and the persons for whom we pay compensation are different from each other. In other words, the basic logic eliminates the victimization of 3rd parties. By this time, there were different methods of calculation of depreciation. I think it is a positive update, as the new regulation brings uniformity to the calculation methods.”

"The main problem is the financing problem caused by the ceiling premium"

Addressing the issues that are not mentioned in the sector, Koray Erdoğan, Ray Sigorta General Manager, pointed out that there are no complaints about the expansion of guarantees on the part of insurance companies, the main problem that may occur is the financing problem caused by keeping the ceiling premiums well below the increase in inflation and exchange rates while expanding the guarantees. He said “There are two elements that make up the damage costs in our industry. One is the exchange rate, the other is the minimum wage. The ceiling premium increased by 12.68% in 2021. Based on the data announced by SEDDK for 2022, we see that there will be an increase of around 16% from 1.25 monthly. We can say that there is a cost increase of close to 47% in Traffic Insurance for the end of November. I would like to remind you that the December developments are not included in this calculation.” Koray Erdoğan, General Manager of Ray Sigorta, made striking statements as follows: “As insurance companies, we cover all damages accurately and on time. In exchange for this, we need to receive the amount of the premium that must be received. If the monthly ceiling premium increase remains at 1.25, the sector will not be able to cover the new costs. The insurance sector provides services to all other sectors and individuals. We eliminate grievances by taking the burden on the state, companies and individuals. In order for us to do this, we need to be financially strong.”

"I think that insurance companies are being treated unfairly"

Koray Erdoğan, General Manager of Ray Sigorta, drew attention to insurance companies, agents, brokers and surveyors working in cansiperane by working hard during the Covid-19 pandemic and in natural disasters and said regarding those who demand that prices be reduced or fixed in Traffic Insurance: “The reputation of the insurance sector with consumers is of great importance to us. "Frankly, I think that insurance companies are being treated unfairly. Since January 2019, vehicle prices have increased by 180-190%. When we examine the financial statements, the loss of the sector, including investment income, was -1 billion TL as of September 2021. If we subtract the investment income, it is -2.5 billion TL.  The premium for damage has increased to 109%, when we add other expenses, it increases to 125%. I think that this rate will increase even more at the end of the year. There is no technical explanation for the fact that we are still saying that we should reduce premiums in a branch where there is damage and insurance companies are already making sacrifices. In order for insurance companies to carry out their activities correctly, they must necessarily be selling at the right premium. As the monthly ceiling premium increase of 1.25 is not enough, an additional revision is needed to cover the costs.
You can access the record of the program attended by Ray Sigorta General Manager Koray Erdoğan at the https://www.youtube.com/watch?v=H3QuXGwLTqk&t=1s.