ISTANBUL - Hürriyet Daily News
Turkey needs to regulate its insurance sector, according to Alexander Ankel, chief executive of Alianz’s local unit. The insurer calls for discipline in pricing
Turkey’seconomy administration has done a fantastic job by launching strong regulations in banking after the 2001 crisis, says Ankel. DAILY NEWS photo, Emrah GÜREL
Turkey should launch strong regulations in the insurance sector as it did in banking after the 2001 financial crisis to ensure the healthy growth of the economy, according to the top executive of the Turkey unit of Allianz.
“The market has been driven by the strong appetite for fast growth, so the competition is fierce and there is no discipline in pricing,” said Alexander Ankel to Hürriyet Daily News, noting the sector was “overpopulated” with 39 companies.
“Moving toward a regulatory framework that is more in line with the banking industry” is crucial to attaining sustainable growth in Turkey’s insurance market, he said.
“Lack of discipline in underwriting appetite for growth rather than profit is common” in the sector, he said.
Turkey’s economy administration has done a fantastic job by launching strong regulations in banking after the 2001 crisis, the chief executive said. “Unfortunately, this is not yet the case for the insurance industry.”
He said the underwriting losses in the sector rose to $1 billion in 2010 from $688 million in 2009 and $439 million in 2008.
According to him, this is largely caused by the wrong underwriting process by which insurance firms decide how much in premiums to charge for accepting those risks. Fierce competition, lack of regulation, low profitability and underwriting losses also cause decline in customer service, which later might trigger mistrust in the insurance sector among the public.
Previously having worked in Japan, Singapore and Malaysia, Ankel said he finds Turkey’s insurance sector way behind its real potential.
“Turkey still has insurance penetration which stays at 2 percent of the gross domestic product of the country,” he said. “In order to convince shareholders overseas, Turkey need to become a market that does not only have the potential to grow but also to produce return on investments.” ‘The marathon runner’
But this is difficult under the current conditions, he said. “Allianz is a marathon runner, not a sprinter,” Ankel said.
Noting Allianz currently has nearly 1.1 million customers and ranks the third largest in Turkey’s property insurance segment, Ankel said “For our competitors capital might be a scarce source; this is not the case for us.”
Turkey ranks among the top four emerging countries of the world, he said. “Since the country is ambitious to become a global economic powerhouse, basically stronger regulation is inevitable.”
Moreover, he finds that the insurance sector might also play a significant role in curbing the country’s chronic current account deficit, which hit $77.8 billion last year. An increase in personal pensions might also balance the country’s low investment ratio by nearly 12 percent of GDP.
According to Ankel, Turkish authorities have been planning to increase tax incentive from the current 35 percent for personal pensions to reach a sustainable domestic savings ratio.