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Turkey 2014 | FINANCE | VIP INTERVIEW

TBY talks to Serhat Süreyya Çetin, General Manager of Güneş Sigorta, on growth factors and maintaining a solid distribution channel.

For the last couple of years, Güneş Sigorta has been experiencing growth of about 12%-13%. What were the main factors behind this expansion?

Güneş Sigorta has very strong and diversified distribution channels. We work mostly with private agencies and are present nationwide in every city, large or small. Of course, it's to our advantage that we're a subsidiary of one of the largest banks in Turkey, VakıfBank. Our success basically comes down to managing our channels with good relations and an efficient network.

In which sectors of the Turkish economy do you see the most potential for Güneş Sigorta?

Every line of business has potential in Turkey because the economy continues to grow and, therefore, the insurance sector grows along with it. Furthermore, the Turkish insurance sector remains under-penetrated, which leaves much room for expansion. There are many large foreign players in Turkey today, all having recognized the country's true potential. This makes for an environment of stiff competition. The motor insurance line is, of course, the main driver, meaning mainly third party motor liability, which, being compulsory, is easy to sell. This said, we're actually decreasing our market share in that area due to the considerable loss it entails. It's simply not a profitable line. Instead, we're increasing our market share in lines such as fire, engineering, marine, bank insurance, and also health. There's a lot of growth potential in those lines, and we've doubled our figures across the board.

“Every line of business has potential in Turkey because the economy continues to grow."

As the market becomes more competitive, can you elaborate on the advantages Güneş Sigorta has over the newcomers?

Our private agency distribution channel is one of our biggest advantages. Also, our bancassurance channel remains underutilized. VakıfBank is one of the largest banks in Turkey, and Güneş Sigorta is one of the biggest insurance companies. In the past, we didn't need to work together too much as our private agency distribution channels were doing fine. Yet today we recognize the advantage of cooperation with VakıfBank to expand our distribution and sales channels. We have integrated more and have many common projects. This has already resulted in 60-point growth in bancassurance, and we still see considerable room for more. VakıfBank has many retail customers, as do we, and so we can—and have—come together, and are now working on the customer relationship management (CRM) process. So by refocusing our main attention to bancassurance lines, we can take advantage of having a wide bank network to work with, thereby maintaining an advantage over newcomers. At the end of the day, all of the insurance companies essentially sell the same products, and mostly at the same prices. What differentiates one over another is the extent and quality of its distribution channel. If you have that and can manage it well, you have the advantage.

Can you tell us about the level of foreign interest in Turkey's insurance sector?

There's been a huge rise in foreign involvement. Foreign insurance companies today account for 85% of market share, up from just 35% six years ago. As a result, Güneş Sigorta is one of the few domestic insurance companies remaining, along with Anadolu Sigorta and Ak Sigorta, as well as some smaller companies.

What's your outlook for the insurance sector?

There is room for more domestic companies to emerge, and also for another large local player within the next five years. There are also many mutual companies, which also have considerable potential in this market.

What regulatory or legal changes need to be made to further realize this potential?

I don't think substantial changes are required. Being candidates for EU membership has already brought our regulatory framework in line with European and international standards. There are new laws regarding insurance, which are in place today. For example, the Treasury now audits the sector, and we have tougher regulations than even the EU. However, there are still some problems in terms of claims management, and with the judicial system, but I believe that we'll shortly have financial courts in place. The new law for that has been approved and is on its way. These financial courts will help out a lot, especially in motor and third-party motor liability cases, which can drag on and on in the current court system. Spain has done this, and we will have a similar system. It is estimated that it will be implemented during 2014. Other than that, there's no need for further regulations.

Turkey is the 17th largest economy in the world, and yet in terms of the size of its insurance market it only ranks about 35th or 36th. What does Turkey need to do for its insurance sector to match the size of its economy?

I think we're doing our homework well, and the future looks bright, yet existing competition is killing prices, and low prices in turn are killing off the chance of creating and selling new products. New companies often come in and try to attract clients by underselling the more established competition. Customers receive the lowest price when they need it, and so innovation is a struggle. But once these new players in the insurance sector settle in and prices stabilize back to normal, the sector will grow and expand. The usual insurance lines are in motor and health insurance. And yet, there are of course many more risks in life. For example, we're working on insurance policies that cover your children's educational costs. The time is not yet right for this, but it's an innovative new product. There is much potential in life insurance, and not just in pensions. As the economy grows, people will consider new life insurance options, too. Also, there are insurance opportunities in terms of covering the liabilities of lawyers or accountants. I expect growth to come from liabilities, personal liabilities, medical malpractice, and professional liabilities. Once the new financial courts are in place, there will be more liability claims. As things stand today, nobody wants to get bogged down in the legal system. But when the new courts are in place, doctors, for example, will need much more coverage. Right now they have low rates with low premiums, because they don't need it. But with a more efficient legal system in place, liability claims are sure to increase, which means more insurance policies and higher premiums.

What are your future expectations for Güneş Sigorta?

Last year was both good and bad. We saw solid growth in profitable lines, but we kept more reserves than in previous years, which made for some loss in 2013. With every new regulation we needed to keep new reserves. Our main losses were in third-party motor liability, although these were mostly from 10 years ago, and the reserves for those claims have been paid. Thus, in 2014, we expect business to improve, and to be profitable. By the end of 2014, we will be a different Güneş Sigorta from what we were in 2012. We expect a further 50- or 60-point growth year in 2014. Furthermore, we'll have the strength and potential to compete with newcomers.

© The Business Year - March 2014