Insurance and Private Pensions Sector in Turkey

Transcription

1 Insurance and Private Pensions Sector in Turkey M. Akif EROĞLU General Secretary 04/10/2018

2 AGENDA i. Turkish Insurance Market: An Overview ii. MTPL 1. Reducing Traffic Accidents 2. Tariff System 3. Regulation 4. Court & Insurance Arbitration iii. Auto-enrollment iv. Recommendations to develop Insurance & Private Pensions Industry v. The Bottomline 2

3 I. Turkish Insurance Market: An Overview 3

4 Main Indicators Number of companies: 63 Non-life: 39 Life and Pension: 22 Reinsurance : 2 Total Assets: (2018/6): 164,8 Bln TL (40,3 bln USD) Premium Production: 2018/6: 26,7 Bln TL (6,5 bln USD) 2017: 46,6 Bln TL (12,8 bln USD) 4 Source: SDK 2017, TSB, 1 USD = 4,0865 TL, 2018 Q2 Exchange Rate for USD

5 BES & Auto-enrollment: Total Funds & Number of Participants ( ) Total Funds 90,7 bln TL (22,0 Bln $) Number of Participants (mln) 12, ,8 bln TL 930 mln $ , ,9 bln TL (21,3 bln $) ,0 0 0 BES OKS BES OKS 5 Source: EGM

6 Growth of GDP & Premium Production (%) , ,6 13,8 10 8,9 8,5 10 8,8 9,7 6,1 7,4 5 2,2 4 2,9 3,2 2, ,8-5 Growth Rate of GDP Growth Rate of Premium 6 Source: TSB, TÜİK

7 Breakdown of Premium Production by Non-life Branches (2018/8) Other 7,3% Accident 3,9% MTPL 33,5% Sickness/Health 13,2% Motor: %49,4 Fire and Nat. Cat. 13,7% Land Vehicles 15,9% General Damage 12,5% 7 Soruce: TSB August 2018

8 Gross Loss Ratio by Branches (2018/Q2 & 2017/Q2) Gross loss ratio (%) Traffic Land Vehicles Fire and Natural Disaster TARSİM General Losses Accident Total Non-Life Life 2018Q2 2017Q2 8 Source: TSB June 2018 Gross Loss Ratio

9 Profitability (2018/6 2017/6) 500 Technical Profit (million USD) /6 2017/

10 Profitability (2018/Q2) Non-life Insurance 1,8 billion TL (428,6 mln $) Life Insurance 727 million TL (177,8 mln $) Private Pensions 213 million TL (52 mln $) Total Technical Profit 2,7 billion TL (658,4 mln $) Net Profit 2,8 billion TL ( 684,8 mln $) 01/07/ /06/2018 Non-Life Life ROE %17 %39,4 10 Source: TSB June 2018 Income Statement

11 11 II. Agenda: MTPL

12 MTPL Technical Results In 12,5 years, total loss: 8 bln TL /Q MTPL Non-life Source: TSB June 2018 Income Statement

13 MTPL Technical Results (million TL) Technical Profit ( Excluding Investment Income Transfered from Non-Technical Part) /Q Technical Profit Technical Profit Technical Profit ( Excluding Investment Income Transfered from Non-Technical Part) MTPL /Q2 Technical Profit Investment Income Transfered from Non-Technical Part Technical Profit ( Excluding Investment Income Transfered from Non-Technical Part)

14 The Reason Are: Traffic Accidents MTPL Price Cap Issues on the Court Stages Regulation Effect 14

15 Main Reasons: Traffic Accidents 15

16 Traffic Accidents: High frequency EU-Turkey Claims Frequency (2014) 10% 9% %9 8% 7% 6% %5,9 5% 4% 3% 2% 1% 0% Turkey EU 16 Source: 2016, European Motor Insurance Markets Addendum, TÜİK

17 Traffic Accidents: High claim EU vs. Turkey: Fatality in the accidents per 100 thousand people Number of people lost their lives in the traffic accidents 9 4 Turkey EU 17 Source: IRTAT, 2016

18 Traffic Accidents: Traffic Monsters 79,6 thousand Drivers 303 thousand Accident The number of accidents by those drivers who caused 3 and more accidents in the preceeding 3 year-period. ( May) 18

19 Main Reasons:MTPL Price Cap Price Cap 19

20 MTPL: Claims and Expenses Loss Ratio Combined Ratio % 118,4 % 134,7 20

21 MTPL: Claims and Expenses High Risk Insurance Pool Loss Ratio Combined Ratio % 123,7 % 136,7 21

22 Main Reasons: Regulation Regulation effect 22

23 Main Reasons: Regulation No standardization in the calculation of claims (deprivation of support and permanent disability) No standardization in the calculation of loss in value Limitation of usage of equivalent spare parts 23

24 Main Reasons: Regulation / Increase of Bodily Injuries The share of bodily injuries claims within the total paid claims has increased rapidly in recent years. 60% 50% 40% 30% 20% 10% 0% 47% 51% 52% 51% 38% 35% 26% 13% 13% 15% 16% 13% 17%

25 Main Reasons Regulation / Increase of loss in value 120,00% 100,00% 80,00% 60,00% 40,00% 20,00% 0,00% Application Rates of Insurance Arbitration Commission MTPL Casco Number of application increased from to between the years 2015 to % 95 of application is MTPL, % 75 of application is loss in value. 25

26 Oca.14 Şub.14 Mar.14 Nis.14 May.14 Haz.14 Tem.14 Ağu.14 Eyl.14 Eki.14 Kas.14 Ara.14 Oca.15 Şub.15 Mar.15 Nis.15 May.15 Haz.15 Tem.15 Ağu.15 Eyl.15 Eki.15 Kas.15 Ara.15 Oca.16 Şub.16 Mar.16 Nis.16 Main Reasons: Regulation / Decrease of Equivalent Spare Part Usage 80% Usage rates of Original/Equivalent Spare Parts 70% 60% 50% 40% 30% 20% 10% 0% Usage rate of Original Spare Parts (%) Usage rate of Equivalent Spare Parts (%) 26

27 Main Reasons: Court Decisions Issues on the Court stages 27

28 Court/Arbitration Decisions Ensuring that court decisions are in compliance with the regulation Decisions taken in compliance with the regulation Decisions taken not in compliance with the regulation Courts Arbitration Total

29 Insurance Arbitration System Average claims amount increased to TL from TL in six years. ( % TL Arbitration Fee Arbitrator Fee 100 TL 350 TL TL Average cost of demands made for loss in value 3.385TL Loss in value calculated by arbitration The overall cost of loss in value by arbitration Expert Fee Legal Expenses Total 330 TL 1800 TL 2580 TL *Includes expenses for experts and legal expense 29

30 II. Agenda MTPL Efforts 30

31 Association Efforts MTPL Action Plan Reducing Traffic Accidents Action for the Tariff system Action for the Regulation Action for the Court/Insurance Arbitration System 31

32 II. Agenda MTPL Efforts 1. Reducing Traffic Accidents 32

33 Reducing Traffic Accidents: Workshop We have taken initiative with all the stakeholders relating to the road safety in order to achieve radical fall in the frequency of traffic accidents 33

34 34 Decreasing Traffic Accidents:Collaboration with Traffic Authority

35 35 Social Media Entries

36 Reducing Traffic Accidents:Collaboration with Traffic Authority #Bu Kemer Sana Çok Yakışır 36

37 Reducing Traffic Accidents: Recommendations Sharing of drivers penalty scores for using in tariffs Reduce black holes on traffıc Training support/rehabilitation of drivers who make frequent accident Suspending driving licence of drivers who make frequent accident Colloboration with Universities and Education Ministry Expanding the protocol on the sharing of the bodily injury minutes Promoting telematics and smart security systems in vehicles 37

38 II. Agenda MTPL Efforts 2. Tariff System 38

39 Actions taken for the Tariff System Revising Premium Cap based on The result of UW year basis for the MTPL Pool The effect of exchange rate on costs An increase in Premium cap An increase in monthly adjustment rate Implementing the free tariff in vehicle groups in the segments outside the pool Revision of some intermediary costs and public expenses on MTPL tariff Declining the rate of Social Security Institution s(sgk) share 39

40 II. Agenda MTPL Efforts 3. Regulation 40

41 Regulation: General Terms Regulation Standart calculation method on the loss of support indemnity Standart calculation of loss in value Expanding the usage of equivalent spare parts Removal of TSE exclusivity /OSEM) Special Thanks. Supporting domestic equivalent spare production to help minimizing current deficit (500 million USD less import) 41

42 II. Agenda MTPL Efforts 4. Court & Insurance Arbitration 42

43 Efforts: Court/Arbitration Efforts for courts/judges Visiting Supreme Court President Signing protocol with Turkish Academy of Justice Discussion of MTPL regulation in panels and symposiums with the every level of courts 43

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45 45

46 Review of Arbitration System Efforts for Arbitration Commission/Arbitrators Detection of problems in arbitration system and improving solutions Recommendations for revising the Insurance Arbitration Regulation Sharing the proposals with the Insurance Arbitration Commission and the Ministry of Treasury and Finance Legislation change Special Thanks.. 46

47 III. Agenda: Auto-enrolment 47

48 Auto-enrollment : Opt-out ratio: 63% Target Population Number of Participants (employees) Total Fund 14 mln 4,9 mln 3,8 bln TL (880 mln $) Enrollment rates of workplaces to pension system by their size (number of employees) Total Enrollment rate of workplaces, emplyees, %56,5 %100 %99,8 %94,1 %94,1 %56,5 %64 Almost workplaces, have 5-9 employees, will enroll to the pension system 48

49 Strengthening the Social Security System and Increasing Savings Social security systems is composed of three basic pillars. Occupational pension plans form the 2nd pillar which is complementary to the social security system, compulsory and entails employer contribution. Auto-enrollment in our country consists of providing easy access to the 3rd pillar, voluntary, pension system with no obligation to stay in the system and without employer contribution. For the establishment of 2nd pillar occupational pension plans in our social security system we need to reform the auto-enrollment practice Next 20 years offer a demographic window of opportunity for Turkey, in terms of savings, due to the high share of the population in productive working age group therefore this opportunity should be seized.. 49 Source: OVP Draft,

50 Reforming Auto-enrollment Successful models in auto-enrollment Rise of employees in occupational funds after auto-enrolment New Zelland: %59,2 growth UK: %47,2 growth Italy: %11,6 growth Employers contribution Compulsory Effective communication Starting employer contribution as a small amount or transforming part of severance payment as employer contribution Once enrolled into the system employees should be locked-in for a certain period Changing the short-termness in perspective with constant communication with the public 50 Source: EIOPA Pension Statistics , PPI Brefing Note No:99, OECD Statistics

51 Growth of 3rd Pillar Decelarates after Auto-enrollment/Revision need Q2 (Net Participant Number) Average annual increase in the new participants declined by 49% in the last two years Q2 (Net Participant Number) Average annual increase in the new participants declined by 49% in the last two years Private pension savings should be collateralized in loan applications Legislative amendment allowing under 18s to enter into the private pension system 51 Source: EGM 30 June 2018

52 IV. Agenda: Time to improve of Nonbanking Financial System 52

53 Development of Non-Bank Financial System: Share of Insurance Insurance and Pension 4% Other 7% 2017 Credit/deposit rate= %125 3,7 trln TL Syndicated loans are fragile and relatively costly Economy Program/YEP Bank 89% Banking system funds maturity very short Not enough for funding long term investments Turkey is a fast growing economy in need of long-term financial resources: diversity of funds In this respect, it is necessary to increase domestic savings and develop insurance and pension industry 53 Source: TSB, TBB, TCMB, SDK 2017, BDDK, July 2018

54 Banking vs. Insurance 350% Assets/GDP (%) In 2017; 300% 291% 250% 200% Turkey is the 17th biggest economy in the world 150% 100% 50% 0% EU 62,2% 105% 4,7% Turkey Turkish Insurance Industry s ranking: 39 in the World Banking Sector Insurance Sector 54 Source: TCMB, IMF, Sigma, TBB, 2017

55 55

56 Funds Supplied for the Economy&support Capital Markets Bonds on gold; 4,8; 4% Other Capital Market Instruments; 8,4; 6% Capital Market %81,2 Bank Account (TL); 34,4; 26% TL: %85 Foreign Currencies: %15 T-bills&Gov. Bonds; 43,2; 32% 135,3 bln TL (33,1 bln USD) Bank Account (Foreign Currencies); 8,5; 6% long maturity Corporate Bonds; 13,9; 10% Equities; 11,3; 8% Eurobond; 10,9; 8% DASK: 6 bln TL (1,5 bln USD), TARSİM: 1 bln TL (244,7 mln USD) 56 Source:: Takasbank, 30/06/2018; Balance Sheets 2018/Q2

57 Stabilizing Economy 5 4, , ,54 4, ,2 3,8 3,56 3, , ,93 3,79 3,76 3,8 3,96 4, USD BIST100 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% Equities and Foreign Currencies in Portfolio of Pension Funds Eyl.17 Eki.17 Kas.17 Ara.17 Oca.18 Şub.18 Mar.18 Nis.18 May.18 Haz.18 Tem.18 TL : %85 Foreign Currencies: %15 Equity Eurobond, Foreign Securities 57 Source: TCMB, BIST, Takasbank; Graph: TSB

58 58

59 Supporting Social Security System Ageing Population Men Women Expected Lifetime Ageing Population Year Men Women Total 2014 (TÜİK) 75,3 80,7 78, (UN Report) 81,0 85,0 83,0,12,10,8,6,4,2 0 0,2,4,6,8,10, Increased life expectancy increases the pressure on social security systems. Private pension systems gain importance, 59 Source: EUROSTAT, TÜİK, UN Report

60 Support Social Security Systems Insured/Pensioner Ratio Worsening Dependency Ratio In 1980, Insured/Pensioner ratio = 3,3 Today, Insured/Pensioner ratio = 1,91 In 2020, Insured/Pensioner ratio = 1,60 60

61 V. Recommendation for Growth of Insurance & Pension Sector 61

62 Improving Insurance Sector/Life Insurance(2017) Dünya Sigorta primleri 100% 90% Breakdown of Written Premium by Insurance Branches (life & Non-life) World vs. Turkey 14,7% 80% 70% 54,3% 60% 50% 40% Life Non-life 85,3% Penetration Rate Life Non-life 30% 20% 10% 45,7% Turkey 0,20% 1,22% EU 3,77% 2,68% 0% World Turkey Supporting different life insurance branches (education insurance, return of premium life insurance, old age insurance, care insurance) in order to level up with the world scale in terms of insurance market development, (by means of increasing tax relief, constant communication and providing public subsidies to investments such as nursing homes) 62 Source: Sigma, SDK 2017, SBM

63 Improving Insurance Sector/Non-life New Insurance Areas Surety Bonds Complementary Health Insurance Credit Insurance Cyber Risks Tekaful insurance and pension (Comprehensıveness) Liabilities Climate change risks/hail (three out of four vehicles don t have casco insurance) 63

64 Improving Insurance Sector Other Recommendations Enforcement of insurance as a pre-requisite for issuing workplace permits/licences Increasing penetration of TCIP/Fire Insurance Every 3 house out of 4 lack of household insurance Half of the houses don t have TCIP insurance Half of the companies don t have fire insurance 64

65 Increasing TCIP penetration for Houses & Increasing Facultative Earthquake Insurance for Workplaces Half of civil dwellings and workplaces do not have earthquake insurance and are at serious risk! 1999 Marmara Earthquake caused economic loss of US $ 20 billion Only $ 1 billion of the damage paid by insurance companies In an earthquake scenario of magnitude 7.5, it is estimated that 300 thousand buildings will be damaged structurally in Istanbul. It is estimated that the earthquake will cause losses up to approximately 10% of GDP 65 Source: Swiss Re

66 Improving Insurance Sector Other Recommendations Preparing the sector and all stakeholders for the Industry 4.0 and other radical developments such us autonomous vehicles, new trends and custom changes of generations Supporting digitalisation/insurtech/ start ups.. Re-structuring regulatory and supervisory authority 66

67 Improving Insurance Sector Awareness/Communication Government support Public service broadcasting Introducing courses into the curriculums with subjects to educate students on the role and importance of insurance More effectively designed insurance week /with the help of government support To emphasize the importance of insurance and savings in the mosques (Cuma Hutbesi) 67

68 Turkish Insurance Association Efforts;ROAD MAP A S S O C I A T I O N WORKSHOP AUTHORITY CEO s TOBB SAIK SEIK MEDIA BROKERS Strategy & Distribution Channel & Communication Commities S T R A T E G Y P A P E R 68

69 69 VI. The Bottomline is

70 As a Result; Insurance and Private Pensions Industry should be; Recognized as «THE STRATEGIC INDUSTRY» And should be; Paid closer attention to our problems Supported & Protected 70

71 Thank you very much for your patience. Mehmet Akif Eroğlu Secretary General Turkish Insurance Association 71