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%.
This could be accompanied by 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.
To achieve this, non-life branch premium must increase fourfold to 63 billion Turkish lira. This would make Turkey the 16th largest non-life market in the world.
Similarly the market for term life insurance could increase from a current premium of 2 billion TL to 16 billion TL.
These attention-grabbing headlines make for exciting reading, but how realistic are they? In a series of articles I will look at some of the fine detail behind these scenarios.
But for now, the important thing to recognise it that there seems to be a coming together of industry and government with a will to make things happen. For years we have been saying “the insurance market in Turkey just has to grow – look at the size of the population and rapid economic development and low penetration rates.” The big question for foreign investors has been “how much longer do we have to wait for our expectations to be realised?” For some there have been doubts “Will it ever happen?”
There seems to be a slim light at the end of the tunnel as there could be strong political will as part of the international financial centre impetus to implement the strategies necessary. Recent changes to the tax incentive for the PPP system and rumours about other future changes point in this direction.
The report clearly states that there needs to be a roadmap for the way forward, including working groups and firm actions.
It identifies the following 4 key areas:
1. Establishing a more customer focused approach to increase customers’ confidence and trust in the insurance industry
2. Acting in incorporation with the government to explore options to increase savings and protection provision and to help individuals/enterprises manage financial distress caused by accidents, ill-health or old age.
3. Offering a high quality service through a broad choice of sales channels with higher focus on the customer needs.
4. Establishing a healthier market through increased efficiency and standardisation.