XPRIMM: How would you characterize the local insurance market evolution over the past few years?
Atilla OKSAY: When the evolution of premium production is examined, one can notice that the sector has grown in real terms except during the crisis period. The sector has recorded a 6.2 % growth in real terms in 2012. In what concerns the premium production, in 2011 the sector achieved a 10.5 % increase in real terms. In addition, the Turkish insurance sector has witnessed, except the crisis period, a real growth above the inflation level. Despite this, the progress observed in the premium production over the last few years has not had a positive reflection on the technical results. Although the sector achieved progress in building a strong legislative infrastructure and increasing awareness on insurance, the technical profitability failed to improve due to fierce price competition in the sector.

XPRIMM: How was the insurance market in Turkey affected by the financial crisis?
A. O.: As in the case of other sectors, the insurance sector is also affected by fluctuations in the economy. However, the results of these effects are sometimes observed on longer term while some others are noticed on shorter terms. The impact of the global crisis which affects the entire world is also observed in Turkey and contraction replaces the real growth. The Turkish insurance sector that records a growth rate above the inflation level every year thanks to the positive progress achieved by the economy and the stable growth period during the last years, has gained experience due to previous financial crises. However, the last crisis was hardly manageable due to its global scale. Postponement of new investments, the drop in the export volume, the recession in car and property sales, and contraction in the economy and the reinsurance market are the major threats the sector is facing in periods of financial crisis.

XPRIMM: Many of the large international insurance groups are present in Turkey. Why is Turkey an attractive market for foreign insurers?
A.O.: The young population and the low penetration rate in Turkey make our country attractive for foreign companies. The Turkish insurance market also offers a good opportunity for newcomers due to its growth potential and its appetite for new products. Both the legislative infrastructure and our government's supportive role accelerate the new investments as well. Therefore, in the last years many international insurance groups have entered the market by acquiring local firms.

XPRIMM: How much does the retail business represent out of all the written premiums? How has the retail segment evolved over the past few years?
A.O.: On the company side, the companies started to pursue customer oriented strategies. We believe that this has enhanced the trust in the insurance sector. In the last few years, personal lines and small businesses have been working hard to increase the penetration by focusing on customer satisfaction and different distribution channels.

Consumers obtain information mostly from agents while they are selecting insurance products. The credibility of an insurance company is the major issue that insurance clients take into account while they select an insurance company. The agents are the leading actors (67.8%) in the distribution of non-life products while bank staff (77.3%) is the primary actor in the sales of life and private pension products. Therefore, the role of distribution channels has become crucial in terms of the sales of insurance products.

XPRIMM: A lot of companies have invested in the health insurance sector. What is the reason behind this trend?
A.O.: The Social Security Institution (SGK) offers an extended coverage scope. Earlier in 2007, when Law No.5510 on Social Security Insurance and General Health Insurance came into force, our Association expressed its concern that such an extended coverage package could not be maintained in terms of actuarial calculations and therefore stated that complementary health insurance needed to be implemented. Meanwhile, our prediction proved true and public spending on healthcare has dramatically increased. Accordingly, complementary health insurance has come on the agenda again.

Due to SGK's extended coverage package, the number of insured remained 1.5 million. The insured persons separately pay premiums both to SGK and the insurance companies. However, we expect that the number of insured will increase to 8-9 million when complementary health insurance comes into effect. This is why we believe that the growth potential of the market leads companies to focus on this area.

XPRIMM: What are the major insurance lines at the moment, which hold the highest growth potential in the future?
A.O.: Liability insurance became widely demanded in our sector in parallel with the legislation adopted during the harmonization process with the European Union. The increased sense of liability and the court decisions regarding indemnities played a supportive role in this rising trend. During the financial crisis period a significant increase has been observed in the demand for the unemployment insurance. We expect that financial loss and unemployment insurance will continue to have a high growth potential in the following years.

XPRIMM: What are the benefits of the TCIP (Natural Disaster Insurance Institution)?
A.O.: According to available data, 96% of our lands and 98% of our population is under earthquake risk to different extents. Despite the fact, the rate of compulsory earthquake insurance policies underwritten in Turkey has not reached the desired level. Following the big disasters, an increase is observed in the demand for facultative earthquake insurance, which is provided in addition to compulsory earthquake insurance and fire insurance. However, this increase cannot be sustained and policies cannot be renewed in the following years as time passes and people forget about the disasters. In this respect, TCIP plays an important role as it is working towards raising awareness on earthquake risk and compulsory earthquake insurance through publicity campaigns conducted nationwide.

XPRIMM: How much does a Turkish citizen spend on insurance every year? How has that figure evolved?
A.O.: As of the end of 2012, total premium production per capita in Turkey was recorded at a value of 146 Dollars. In the last years, a rising trend has been observed in the amount spent on insurance due to growing awareness on insurance as well as companies' customer-oriented strategies. Five years before, the average amount that policyholders spent on insurance products was only 119 Dollars. This proves that the society has become more aware of the benefits provided by insurance and trust in the insurance sector is improving.