BETTER IN THAN OUT

Turkey 2016 | FINANCE | INTERVIEW

TBY talks to Mehmet Bostan, CEO of Vakıf Emeklilik, on the development of the pensions system and the firm's position in the market.

Mehmet Bostan
BIOGRAPHY
Mehmet Bostan gained his Bachelor’s degree from Istanbul University’s Department of International Relations and earned his MBA degree from Istanbul Bilgi University. Starting his career as a Corporate Banking Executive at Denizbank, he continued with BNP AK Dresdner Bank as the Marketing Manager. In the following years, he worked as a manager at Development Bank of Turkey, Chief Representative at Dresdner Bank AG, and CFO at Güneş Sigorta. As of 2010 he has been Board Member and CEO of Vakıf Emeklilik. Also, he has been a Board Member of Turkcell since August 2013. In 2013, he was appointed as Chairman of the Pension Monitoring Center.

The pensions and life insurance industry in Turkey is developing quickly. How does Vakıf Emeklilik fit into this picture?

The private pension system (PPS) started to make a huge contribution to the Turkish economy especially after 2013. In 2013, the government introduced a new aspect to the pension system. Since then, the government has started to pay a state subsidy of 25% for each participant. After the government introduced the 25% contribution to each pension plan at the beginning of 2013, pension fund assets grew 85% in only two years, according to the Pension Monitoring Centre. We expect this growth will continue in 2015. While the number of people in the system until 2013 was only 3 million, today it is 5.5 million and, while the total fund size volume was $7.35 billion during the first nine years, now it has reached $14.7 billion within two years. This is a success, but the government should not be complacent, because we still have a relatively low level of savings and the pension system has room to improve. Besides, when we consider our savings instruments, our diversity is not very encouraging. When we look at population who should be saving, the penetration is only 12%. We should provide more facilities and products for potential savers. Our company was established in 1991 with the aim of operating in the life insurance business. In 2003, with changing regulations, we added pension operations. Briefly related to the year 2015, Vakıf Emeklilik increased its share in the industry to 7%. In addition to our profitability target, our supreme target is to increase our market share involvement above 8% in 2015.

What differentiates Vakıf Emeklilik from its competitors?

As Vakıf Emeklilik, we will continue to progress with all our determination to be the most admired, leading company in terms of customer satisfaction and employee satisfaction by 2016, our 25th anniversary. Vakıf Emeklilik's private pensions plans are bundled with additional benefits. The customers only pay for their pension plan and benefit from various assistance services. This is a huge benefit compared to our competitors. In addition, we are changing the IT infrastructure and applying a one-to-one approach with our CRM systems. We are a company that has introduced some innovative products into niche markets. For example, we are the first insurance company to introduce Participation life insurance in Turkey and this was a partnership with Türkiye Finans. Another point is that we are the first life insurance company offering a mobile branch so that our clients can access every service—from fund management to contribution payment—available from the desktop branch through their mobile devices. Our present and potential customers tend to buy their needs online and, as a life insurance company, it is important for us to supply such services at the mobile age.

How do you work to increase market penetration?

Potential customers do not know much about our industry or our products and it takes time to develop a reliable reputation. Our aim is to reach young people because the size of this group means there is high potential for growth. According to me, we should encourage the population to enter the system at an earlier stage and start to save at their mid-20s. The statistics show that earlier entry is necessary for sustainable life standards.

How do you see domestic life insurance companies in Turkey dealing with potential international investors?

There are around 19 companies in Turkey and this size does not justify the numbers. When we look at shareholders' expectations and break-even points, we can expect some consolidation. Of course, international interest will always be high. If you look at our shareholder structure, it is quite international and this interest seems to continue. With increasing penetration, especially in life insurance, the business will develop, so these companies can make money. Now, per capita insurance expenditure is $150, which is less than one-tenth of developed countries. As far as I am concerned, we still have room to grow here.

What are your expectations for the year ahead?

We have bold targets for the coming year. We will exceed an 8% market share and will continue increasing our market share, as well as our productivity and innovative approach in the market. As the leading company in the industry, we have set assertive targets for next year. Next year our aim is to reach more participants. In 2016, we will continue to apply our distribution channel strategies with our innovative products. We are planning to lower the entrance age to the PPS with our marketing efforts particularly directed toward young people, encouraging them to increase their savings by staying in the system for longer. Our efforts in the corporate PPS will continue to increase in 2016, as in this year. We always succeeded in being the innovative leader of the industry with our vision and services. We are working hard for perfection of the details considered as a standard in the industry.