XPRIMM: First and foremost, how would you describe the current state of the Turkish insurance market?
Mehmet Akif EROGLU: Consolidated market results, in 2015, show a growth rate of 19%. If you look at the last 5 or 10 years you can tell that we've recorded a great progress. The sector is growing very fast, but there is, nevertheless, the issue of profitability. Life insurance companies are profitable. For example, in 2015 they recorded a profit of USD 600 million. The situation is not the same in the non-life segment, mainly because of the MTPL policies, a line which has not been profitable in the last 10 years.

XPRIMM: As MTPL is the main loss generator, how did this particular line of business evolve over the past few years?
M.A.E.: With each year gone by, the losses are getting higher. The main reason is that MTPL covers bodily injuries, hospital expenses and material damage. In Turkey, these aspects are regulated by the Highway Traffic Law, which, unfortunately, is not up to date. According to this law, some definitions are not clear and, because of this gap, courts of law make their own interpretations and the insurance market is sometimes forced to pay for exclusions. This is obviously increasing our costs.

Sometimes, drivers can get indemnities for their own mistakes. For example, there were cases when someone drove under the influence of alcohol and caused an accident. The MTPL policy compensated the third and also the driver himself, even if he was guilty.

And the second reason profitability is affected by this MTPL is that that there is no method regarding the calculations for the permanent disability and life support. The insurers calculate indemnities according to actuarial methods, while the courts of law calculate according to their expert's assumptions. These assumptions, more often than not, are totally different and usually generate higher values. Therefore, our aim is to offer the correct indemnity because, if we don't, we have to increase the premiums for 18 million drivers.

XPRIMM: Did this translate into a price increase on the MTPL market?
M.A.E.: Yes. In the last 5 years the price increased by 54%. At the same time, the value of claims increased by 300%. In the last year and in the beginning of 2016, the sector almost doubled the average price.

XPRIMM: In this context, how are insurers reacting?
M.A.E.: Most of the companies want to decrease their share of MTPL premiums and some of them even did so. The companies present in this line of business are bound to get some losses and that's actually a trend.

XPRIMM: Has anybody decided to leave this segment?
M.A.E: Right now, officially and according to the law, no company cancelled its license, but they use different methods: elevating the prices, lowering the commission.

XPRIMM: Is the Highway Traffic Law going to change?
M.A.E.: As I said, there are 3 problems regarding the Highway Traffic Law: we are paying indemnities which are considered exclusions (out of the coverage), the calculation methodology is inefficient and there is no standard approach, and last but not least, claims requests for bodily injuries filled by the injured parties go directly to the Court, with no previous discussion with the insurance companies.

As an association, as an industry, we discussed these aspects with representatives of the Parliament and the Traffic Police, and we managed to demonstrate the impact of these situations. We've even created a public poll. We found reasoning and managed to change this regulation in order to solve all these issues.

XPRIMM: Aside from MTPL, how are other lines of business evolving?
M.A.E.: Life insurance develops quite well. Last year, it registered an increase of 15%, but the most contracts are linked to credits and are sold by banks. Still, there are no accumulation life products. In Turkey, there is a private pensions system. So clients chose the private pensions over accumulation life products. That's the reason why life products are developing only with the help of bank loans.

XPRIMM: Health insurance has a quite high share in the market also. How would you describe this line of business?
M.A.E.: Actually, it's not up to the level we desired. It has a share of about 12% of the total market.

As a country, as an industry, we have to increase the insurance penetration rate. The motor line has already grown, so our focus now is on other lines of business. Health is one of them. We believe in complementary health products because right now just 2 million people benefit from private health policies and we are 80 million in total. This is because policies of this kind are fairly expensive and our governmental health system is very strong. The Government tries, however, to transfer some of their cost to the private sector. These complementary health products represent a mediation tool between the Government and the private system. I believe we will see some growth here in the near future, for sure.

XPRIMM: Is Turkey a price-driven market?
M.A.E.: It is true. Consumers are very careful about the price, but maybe this is due to low penetration. They don't know the products very well. They don't know the price very well. We have to promote and inform the consumers about the whole range of products. They will see that, most of the times, prices are not as high as they've imagined.

XPRIMM: Apart from the changes in the Highway Traffic Law, what other changes are to be expected on the Turkish market?
M.A.E.: Right now, on the private pensions system there is an auto enrollment system which will start in May or June. The Parliament will pass the regulation.

SME's are very important for the Turkish economy, as well. Actually, they are important for the world economy. Their insurance appetite is low. If we introduce the products to them and explain the benefits, we believe it is going to be mutually advantageous.

We have a very young population and because they are familiar with the digital channel, we have to use capitalize on this. They need tailor-made products. We have to reach them because they aren't trying to get to us.

We also have to increase insurance awareness on a general level, while making financial education a priority.