While Turkey's relatively small insurance market often plays second fiddle to the banking sector, low penetration rates combined with economic growth spells high catch-up potential.

According to the Association of the Insurance and Reinsurance Companies of Turkey (TSRSB), the country's insurance market accounts for 0.2% of the globalmarket, paling in comparison to European market sizes. Per capita premiums also stand well below Europe, owing traditionally to low personal income levels and high inflation.

However, with per capita income on a strong growth trajectory and inflation holding steady near 5%, Turkey's immature insurance market shows attractive growth potential and broad scope for new products and distribution lines.

In 2010, total premiums in the Turkish insurance market rose by 13.6% year-on-year. Market growth in real terms was 7%, with 13% in life and 6% in non-life branches. This follows a period of zero growth in premium generation in 2008 and 2009, due partially to the global financial crisis and partly to deregulation in the motor business that led to a more competitive price environment. In the seven years following the 2001 domestic financial crisis, however, written premiums in the Turkish insurance industry rose from TL2.5 billion to TL11.74 billion, representing an average annual increase of 24.7%.

The total number of policies went up by 17% in non-life branches and 36% in the life branch in 2010. Alleviation of the financial crisis certainly played a major role in policy expansion, but several other stimulatory factors contributed. These include new compulsory policies introduced in liability insurance as well as increased land vehicle and real property sales, which in turn are a reflection of the strong performance in the automotive and construction industries.

The number of policies issued in 2010was approximately 9% above the total in 2009. There are currently 55 insurance companies in the sector.


Compulsory traffic insurance accounts for 34% of the total 21.9 million policies issued in 2010. The accident branch accounted for the largest share of total non-life premiums. Land vehicles represent 25.1%, with motor vehicle liability at 21.3%, and marine at 2.6%. The stimulatory reduction of the Special Consumption Tax on car purchases in 2009 somewhat positively affected premium generation in the accident branch.

Sickness and health insurance, which represents 15.1% of non-life gross premiums, saw a healthy 14% premium increase in real terms as well as 35% more policies in 2010.

On the other hand, fire and natural forces, with 16.7% of non-life premiums, saw a decrease of 4% in real terms in 2010. Many analysts claim this shrinkage is indirectly related to revisions to the earthquake tariff in 2010, as earthquake rates are the benchmark for rate calculations in this branch. Previously, commercial and industrial risks with insured amounts exceeding TL100 million were excluded from the earthquake tariff implementation. In 2010 that threshold changed to $100 million. The lower limit of exclusion resulted in more commercial and industrial risks falling outside the scope of this core tariff. Insurance companies subsequently engaged in heavy price competition for these risks, driving down premiums.

Legal protection and personal accident represent only 0.4 and 5.1% of total non-life premiums, respectively, but are the most profitable branches of the sector with technical profit margins of 57.1% and 44.1% in 2009.

The development of the mortgage market in Turkey has propelled premium growth in credit insurance over the last several years, as many banks require credit insurance before granting housing loans. However, this branch has been especially hard hit by the global financial crisis and recorded a 6.86% loss in 2009.

Accident and traffic, the two major branches of the industry, have seen an increase in claims, which some in the sector attribute to more lenient police verification of accidents. Coupled with a competitive pricing environment, this branch saw higher loss ratios and lower technical profits in 2009 and 2010, even though the number of policies increased.


Historically, non-life has outperformed life in Turkey's insurance market. However, following an increase in non-life claim payment in line with the global economic downturn and a shrinkage of non-life premiums due to price competition, life insurance profitability overtook non-life profitability by the end of 2008 and continues to remain above it.


Agency networks are overwhelmingly the principal channels for premium generation, accounting for approximately 70% in Turkey compared to about 50% in Western Europe. While it has been this way since the inception of the Turkish insurance industry, there are signals that new channels may emerge to challenge the agency-model hegemony, such as direct marketing, telemarketing, and internet marketing. The broker-led business is poised to benefit from increasing product complexity, while in turn perpetuating the further development of sophisticated products.

Bancassurance, through which a company uses a bank's retail sales channel in order to sell insurance products, appears to be a main challenger at present. From 2006 to 2009, the bancassurance channel saw an increase from 42% to 55% in the life category.

In April 2011, BNP Paribas Assurance signed an exclusive 20-year distribution agreement with TEB and Fortis Bank Turkey to use their retail networks to distribute life, pension, and personal protection products.


In 2001 Turkey implemented its Individual Pension Savings and Investment System, a voluntary scheme meant to complement the state social security system. The Turkish Individual Pension System was commissioned two years later in 2003, and six pension companies were born. Pension rights were given to people aged 56 or older with at least 10 years' saving history, so annuity products are set to rollout in 2013.

As of May 2010, private pension funds in Turkey totaled TL9.91 billion with 2.1 million participants. Although its size is miniscule compared to older systems in Europe, the number of contributors and total asset size—only TL299 million in 2004—has grown exponentially in the last eight years.

Today there are 13 private pension companies in Turkey, with the top shares of the market going to AEGON Emeklilik ve Hayat, Allianz Hayat ve Emeklilik, and Anadolu Hayat Emeklilik.


Despite growth figures, new products and distribution channels, and an expansion of compulsory products, such as the recent introduction of required third-party traffic as well as earthquake protection, penetration rates remain very low in Turkey. According to Mine Ayhan, General Manager of Generali Sigorta, only 24% of cars and 20% of houses in Turkey are insured. The penetration rate of earthquake insurance is only 24%, even though it recently became obligatory for both workplaces and households.

According to Ayhan, the responsibility for increasing penetration rates will fall on the insurance companies, primarily in the form of educational projects and promotions. “Insurance companies are especially trying to educate children, to instill an understanding of the importance of insurance," says Ayhan. “We think that with education and wealth, insurance penetration rates will increase greatly in Turkey."

Of Turkey's 55 insurance companies, the top five are global. Many see consolidation likely, as groups with a suboptimal share of the market look either to boost their presence or pull out all together. Overall, the strongest opportunities are in the non-motor lines such as property, with most players shifting their focus in that direction to offset premium losses in the motor branch.