Insurance expects price discipline from foreigners
Posted by meb at February 26th, 2008
The weight of foreigners in the Turkish insurance sector is gradually increasing with acquisitions going on since 2006 as Turkey draws record amounts of foreign investment, but the sector complains that price discipline is still non-existent.
Foreign share in the sector’s aggregate nominal capital, which has approached 20 percent, is expected to increase in the upcoming period. However, besides capital and know-how contributions, the sector wants foreign insurance groups to introduce non-price competition and rational pricing perception.
Foreigners have not introduced price discipline to the sector, said Anadolu Insurance Managing Director Mustafa Su. Despite an expectation that the companies would not behave aggressively in price competition in 2007, competition is ongoing in branches such as health, automobile insurance and traffic, said Su. “We do not obtain the premiums we are supposed to do as insurance sector.”
Not in line with the expectations concerning price discipline, foreign insurance companies will also demand a share of the market, Su said. Due to unfair competition for the last three months, Anadolu launched a campaign so as not to lose its damage-free portfolio and decided to reduce its prices to the level of its rivals, Su added.
In 2008, the companies are revising their accounts particularly on damage free branches, said Su. “Premium/damage balance is good in damage free branches. Results will get worse if the premium in this segment is reduced due to competition.”
Non-price competition:
It is claimed that the number of companies is high in Turkish insurance sector in proportion to its premium production, said Su. Thus, a consolidation may occur in the sector in the upcoming years.
The global credit crunch will not have a direct impact on Turkish insurance, he said. However, insurance sector may be affected if the crisis results in a contraction of the economy, he added. The growth of insurance sector in 2008 will surpass that of Turkish economy and inflation, said Su. “This development may speed up further once non-price competition looms large in the sector. I expect a growth between 15 and 20 percent in the sector this year.”
Anadolu Insurance prioritizes organic growth, said Su, adding that the company is not interested in Güven Insurance, which will be sold via tender this year. Anadolu focuses on five projects including an investment over $10 million in 2008, said Su. The projects will have a great impact on sale processes, operational productivity, premium production and profitability, he added.
Anadolu ranks first in the sector with a market share of 12.14 percent. Anadolu’s premium production totaled YTL 846 million in the first nine months of 2007, up 16.01 percent from a year earlier, according to the data of the Association of the Insurance and Reinsurance Companies of Turkey (TSRŞB).
Source: Turkish Daily News
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