The amendment to the Life Insurance Regulations published on 13 January 2009 and effective March 2009 promised us a new era in life insurance. (Click here for a full translation).
Recent specifications published by Haymer cast doubt on this, and Gaffar Erbek of the Treasury made the position clearer at a sectoral meeting last week.
With the exception of annuity products, all life branch products were expected to be switched to free tariff, with the previous approval system being replaced by a ten day review period by the Treasury. According to the Regulations, companies should submit the technical details of a new product to the Treasury ten days before they wished to sell the product. During this period, the Treasury could request changes to be made to the tariff, and at the expiry of the period the company appeared to be free to sell the product without further steps to the approval process.
The new regime was defined to give freedom with publicity. It appeared that companies could charge what they wanted for expenses and commission, as long as they explained these charges to the customer by writing them in at least 14pt font on the policy.
This led to fears that there could be a commission war, with companies increasing the commission they offered to banks and agents, to the detriment of the customer.
Haymer (Life Insurance Data Information Centre – the body established to collect electronic data from life insurance companies) has established a workflow with the Treasury that will automatically approve tariffs that are within certain limits, pass those outside the limits to the Treasury for further scrutiny and – the point that worried most practitioners who saw the new Regulations as removing the lengthy approval process – automatically cancelling draft tariffs that were not accepted by the Treasury within 10 days.
So it appears that whilst the Regulations say if a tariff is not rejected within 10 days it has been accepted, Haymer’s workflow says if a tariff is not accepted within 10 days it has been rejected. This reminds me of my lessons in logic at university ....!
In a meeting at the offices of the Insurance and Reinsurance Companies’ Association of Turkey last Tuesday, commenting specifically on this point, Gaffar Bey explained that the Treasury received many complaints from policyholders who could not understand how the benefits they received from savings policies fell far short of their expectations when the policies were sold. The Treasury was concerned to limit costs and commission for savings products in particular in order to ensure policyholders receive fair value for money.
It will be interesting to see the next move. Insurance companies, the Treasury and Haymer are still trying to understand and define the new regime.