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Government's plans for our sector in 2017
Demir Hayat now owned by EMF New Europe Insurance Fund
Government rethinking their plans for mandatory private pensions
Nothing's certain except death and taxes
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BES pension funds now as popular an investment as term bank deposits
Takaful insurance trade association formed
Treasury reminds employers of their responsibilities under Automatic Enrollment
Circulatory system disease and cancer the biggest killers in Turkey
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Articles
Term-life market: 100 not out
 

The Insurance Assocation’s report “Shaping Our Future: 2023 Vision for Turkish Insurance and Pensions Sector” sets some heady targets for the industry by the time the Turkish Republic reaches its century.

 

In this article I want to flesh out some of the factors behind the headline figure of the market for term life insurance increasing from a current premium of 2 billion TL to 16 billion TL. 

First of all, this is the “high aspiration growth scenario”; there is also a l less aggressive “accelerated growth scenario” which naturally enough did not attract such media attention (see my non-life article for comments on this).

The current real compounded annual growth rate of term-life GWP is 30%. Penetration, when measured as GWP divided by GDP, is a paltry 0,16%.

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Life and pensions market: 100 not out
 

The Insurance Assocation’s report “Shaping Our Future: 2023 Vision for Turkish Insurance and Pensions Sector” sets some heady targets for the industry by the time the Turkish Republic reaches its century.

 

In this article I want to flesh out some of the factors behind the headline figure of growth in Funds Under Management in Life and Pensions from 13 billion TL to 408 billion TL. This would be a compunded annual growth rate of 28% (c.f. current 18%), and would move Turkey from 49th to 30th position in world rankings on FUM.

First of all, this is the “high aspiration growth scenario”; there is also a l less aggressive “accelerated growth scenario” which naturally enough did not attract such media attention (see my non-life article for comments on this).

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SWOT analysis on Turkish insurance industry
 

Turkey is always a crazy conundrum. One expat friend of mine describes it as “the agony and the ecstasy” of living here. The very factors that excite our senses and enliven our imaginations can at the same time be the ultimate sources of frustration and even pain.

“How much longer?” is my usual cry when I discuss with someone the fact that, given all of the economic and demographic data we have to hand, it is obvious that at some stage in the future the Turkish insurance market must achieve growth and take its place as a strong contributor to Turkey’s GNP, just as the insurance industry is across most of the developed world.

A SWOT analysis included in the Insurance Association’s report “Shaping Our Future: 2023 Vision for Turkish Insurance and Pensions Sector” comes to the not-unsurprising conclusion: the Turkish insurance market has an unfulfilled potential.

 

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Non-life insurance: 100 not out
 

The Insurance Assocation’s report “Shaping Our Future: 2023 Vision for Turkish Insurance and Pensions Sector” sets some heady targets for the industry by the time the Turkish Republic reaches its century.

 

In this article I want to flesh out some of the factors behind the headline figure of non-life branch premium increasing fourfold to 63 billion Turkish lira, maling Turkey the 16th largest non-life market in the world.

 

First of all, this is the “high aspiration growth scenario”. As actuaries, we are used to scenario testing. Using full stochastic methodology we would run a model on a range of assumptions, all calibrated to represent the probable likelihood of them coming true. In presenting the results to our clients we may choose to illustrate a few of these scarios calling them “market consistent” or “best-estimate” or “pessimistic” or “optimistic”. We may prefer to use euphemisms rather than the latter two, choosing to call them “cautious” or “aggressive” respectively.

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Aiming for gold by 2023
 

In 2023 the Turkish Republic will celebrate its 100th birthday. In preparation for this milestone event, various government departments, industry sectors and civil society groups are making plans based around where they would like to be in the year 2023.

The Turkish insurance sector is no exception, and a major report produced by the Association of Turkish Insurance Companies in association with consultants McKinsey sets targets for growth between now and 2023. It is entitled “Shaping Our Future: 2023 Vision for Turkish Insurance and Pension Sector”.

Without vision the people perish; this is a vision for robust growth as insurance takes its place in the wider vision announced by the government to make Istanbul into an international financial centre.

The main headline is that insurance should grow from its current position of 0,5% of GNP to some 11%.

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The perception of insurance in Turkey
 

According to a survey into the perception of insurance in Turkey carried out by IDE Danişmanlık on behalf of the Association of Insurance and Reinsurance companies, we still have a long way to go!

 

Comparing the results of the 2012 survey with the previous one carried out in 2008, we can be pleased that more people are aware of insurance. But during the intervening four year period there has been no real increase in the percentage of the population who are insured.

 

Branches such as Personal Pension, life insurance, comprehensive motor insurance, health insurance, mandatory earthquake cover, household, and personal accident scored between 75% and 95% on the awareness scale. But less than half of the participants in the survey had heard of agricultural insurance, travel insurance and third-party liability.

 

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A Frightening Survey
 

It seems that this year is the year of vampire books and vampire TV series. More frightening that these, however, is a survey on the front page of Haymer (the Life Insurance Information Centre).

 

We all know that life insurance in Turkey has a very low penetration rate, and life insurers are not held in particularly high esteem by the general public.

 

This simple survey sheds a lot of light on the reasons why. There are just five choices as answers to the question “Do you have life insurance?”

 

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Over 2m Turks have a Personal Pension: Success?
 

Statistics issued by the Pensions Monitoring Centre show the number of participants in the BES pension system in Turkey has risen to 2.003.695 at 29 January 2010.  With the number of participants passing 2 million, I don’t want to rain on anyone’s parade. But even if we exclude the vast number of under 25s in Turkey’s population of nearly 70 million, this is a very low penetration rate. There is clearly a lot of work still to be done by the insurance sector to roll out the benefits of owning a pension plan to a wider audience.  

A striking graph in the Pensions Monitoring Centre’s Annual Report for 2008, demonstrates the penetration rates by age. There is no clear difference between rates for men and women – the graph is fairly symmetrical. The dark blue and dark pink lines (representing those who have a BES plan) are clearly a “drop in the ocean” when compared with the vast light blue and light pink areas (those who do not).

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Has it finally caught on?
 

The changes to the tax advantages for the BES Personal Pension system in Turkey effective 1 January 2013 have been heavily advertised on radio and television, with insurance companies vying for the new business it is expected to generate.

But have we seen an increase in uptake? Statistics published weekly by the Pensions Monitoring Centre (EGM) show a considerable increase in participants in the system over the first 3 months of 2013. At 29 March 2013 there were 3,431,007 people with a pension plan, compared with 3,119,033 on 28 December 2012 – an increase of some 10%.

Increased participant numbers for the first 3 months of 2013 were:

January – 114,798
February – 78,554
March – 118,622
 
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One in seven people aged 20-54 have a BES pension
 

Statistics published by the Pensions Monitoring Centre reveal that the number of participants in the BES system rose from 5,063,000 at the end of 2015 to 6,036,000 at the end of 2016 (an increase of 19%).

Coupling this statistic with population figures issued by the Department of Population and Citizenship Affairs  of the Ministry of the Interior, this represents one in seven of the population aged 20-54. 

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