Sure, is there anyone left who doesn't know about auto insurance?
The first things that pop up in my mind when I think of insurance are Motor (Auto) Insurance and Traffic. Frankly speaking, these are the two areas that I have been least involved in my career as an insurer. However, it would not be right not to mention motor insurance and traffic insurance, which are the locomotive of the market.
Traffic insurance covers bodily and physical damages to third parties other than the vehicle owner and the vehicle itself during an accident. Motor insurance, on the other hand, covers damages to the vehicle itself.
In Türkiye, as in many other countries, Auto Insurance is the product with the largest market share. According to TSB's (Insurance Association of Turkey) October 2023 statistics, the ratio of these two insurances to total non-life premium production is 48%. This ratio was 50% in October 2022.
Traffic insurance is the compulsory insurance that occupies the sector the most, affects its profitability, and is confronted with a new issue every day. Its conditions are determined by SEDDK (Insurance and Private Pension Regulation and Supervision Agency). Motor insurance, on the other hand, is an optional insurance offered by insurance companies.
There are 4 types of motor insurance coverage in the TSB Motor Insurance General Conditions and the coverage scope is as follows.
Through this insurance, the insurer provides coverage for the material damages that the insured will directly incur as a result of the occurrence of the following risks to the insured's interest arising from motorized and non-motorized land vehicles, trailers or caravans, construction machinery, rubber-tired tractors, other agricultural machinery specified in the policy and authorized for use on the highway.
a) Collision of the vehicle with motorized or non-motorized vehicles that can be used on highways or railways,
b) Collision of the vehicle with a fixed or moving object as a result of sudden and external effects against the will of the insured or the driver of the vehicle, or collision of the vehicle with such an object,
c) Acts of third parties with malicious intent or mischief, and damages caused by persons who do not have the capacity to act,
d) Vehicle fire,
e) Theft or attempted theft of the vehicle or vehicle parts
Limited Comprehensive Motor Insurance: A product that provides coverage for some of the above coverage groups.
Comprehensive Motor Insurance: A product where coverage is provided for all of the above coverage groups
Extended Comprehensive Motor Insurance: This product provides coverage for all of the above coverage groups and some of the risks that can be included in the scope of coverage with an additional agreement in these general terms and conditions.
Full Comprehensive Motor Insurance: This product provides coverage for all of the above coverage groups and all risks that may be included in the scope of coverage with an additional contract in these general terms and conditions.
A motor insurance policy is a combined policy with the General Conditions of Motor Insurance and the general conditions of more than one insurance. The motor insurance policies offered in the market include the following types of insurance, each of which has its own general conditions;
1. General Conditions of Motor Land Vehicles Optional Financial Liability Insurance - commonly known as Optional Financial Liability
Considered in this way, motor insurance is a policy that includes various technical calculations and different applications that come into play in the event of damage. Most policyholders buy a very complex product based only on the cost, considering accidents and damages to the vehicle, almost without paying any attention to its content.
The motor insurance premium is based on the market value of the vehicle to be insured at the start date of the insurance. For this purpose, the Motor Insurance Value list on the TSB's website is being used. The main coverage price specified in the general conditions is applied to this value. Many factors such as the make and model of the vehicle, the city, the details of the driver, and the cost of parts are taken into account in pricing. Then there are the additional premiums insurers charge for natural disasters such as earthquakes, floods, terrorism, and other additional services. Premiums for Optional Financial Liability, personal accident and legal protection are determined according to the indemnity limits given in the policy. Another important coverage is assistance. Assistance is a service that insurance companies outsource and add to the policy - a kind of intermediary service. All these are added together and the final motor insurance premium is calculated.
Now let's start placing (*) asterix. In motor insurance, the basic premium calculation logic is as above, then there are discounts defined as no claims, professional discounts, license plate discounts, private company/group etc. discounts (*). The damage compensation to be received varies according to the scope of coverage. In this regard, there are different practices in the market that may confuse the consumer (**). The special conditions are a complete mess in my opinion, because there are differences between insurance companies from the authorized service to the limits and conditions under which the special condition is provided (***). The limits and working logic of Discretionary Financial Liability are not well known (****). Assistance coverage was completely different especially after the devastating fires in the summer of 2021 (*****).
(*) Let's start with discounts: If you have not received any compensation or if the compensation received is below a certain rate, a no-claims discount is applied, the rate of which increases every year. In addition, there are various discounts such as single driver discount, professional discount, teacher discount, private company white-collar discount, public employee discount. In case of a situation that does not comply with the defined discounts at the time of a claim, the insurer may take back the discount or refuse to pay the compensation for the damage. This is exactly why, when taking out a policy, it is useful to take the consequences into account before rejoicing that the price has dropped. Because the statement is essential in insurance.
(**) Coverage - Obviously, this part can be complicated for the policyholder. The intermediary institution seeks to determine the requirements with certain questions. The market usually sells an extended motor insurance product, but the insured may prefer a lower premium due to cost reasons, and if he/she is not informed correctly, he/she may be very annoyed at the time of a claim. Let me give an example, recently an agency was asked for a quote for a luxury segment vehicle, and the premium was quite high. For the same vehicle, the bank came with a premium of almost 10% of the rival offer. Two confusing premiums. In the past, one might have thought that the insurance company offering the higher premium did not want to insure this vehicle, but this is no longer the case. When we compared the offers, the bank offered a limited car insurance policy that only gives a write-off after a certain percentage and does not extend to natural disasters, etc. However, could be even called car insurance? Yes, indeed. Beware!
(***) The special conditions confusion: Conditions in the policy must be met in order to trigger additional coverage such as cigarette burns, use of original/replacement parts, defined service network, loss of keys or loss of items inside the vehicle, and the limits given by insurance companies may vary.
(****) Optional Financial Liability (OFL): In fact, this coverage comes into play in cases where the limits of the compulsory traffic insurance for vehicles are not sufficient and should definitely be included in the motor insurance policy. The traffic tariff has changed as of 1.1.2024, and the OFL coverage comes into play if the compensation limits in this tariff are not sufficient. I believe that the OFL limits given in the motor insurance policies in the market are insufficient. The highest limit that can be taken here should be taken, or even an unlimited version should be preferred if available. Vehicle costs are very high, parts and labor are expensive. On top of that, consider the injuries or that something worse may happen in the event of an accident. An important note, since this coverage follows the general conditions of traffic, moral compensation claims, which are exempt in traffic, should not be overlooked in the motor insurance OFL.
(*****) Assistance: Especially during holiday periods when travel is intense, there is a surge in traffic accidents. During these periods, car rental services are also very popular. The issue of substitute vehicles in assistance has been a serious problem recently. Sometimes insurers could not find a substitute vehicle or could not provide a suitable vehicle. In some cases, the vehicles provided were too dirty and worn out to be used and complaints soared. During this period, some insurance companies announced that their main responsibility was to compensate for the damage incurred, and that they had removed the provision of substitute vehicles, which was not part of their job description, from their packages. Replacement vehicles are still available in some insurance companies; especially the towing of the vehicle after an accident, emergency assistance services, accommodation expenses can actually be very much needed in that chaotic moment. For this reason, it is useful to examine the assistance package in detail.
Let's not skip the personal accident and legal protection services that I have not explained in detail here. Although it does not attract much attention in the motor insurance policy, in fact, personal accident is immediately activated in case of loss of life or permanent disability of the driver and passengers in the insured vehicle. Legal protection, on the other hand, is a legal expenses coverage that we can benefit from in cases where we need to defend ourselves, but we are never aware of it (Lawyer fees and defense costs are quite high, let me remind you).
Meanwhile, let me emphasize that motor insurance is valid within the borders of Türkiye, and that you should add an overseas coverage to your motor insurance and also get green card insurance if you are going abroad with your car.
Motor insurance, insurance companies, thousands of agencies and brokers, hundreds of auto damage specialists, automotive sub-industry production and trade institutions, thousands of repair services divided into different specialties, R&D, logistics, health institutions, lawyers, etc. are actually a huge eco-system spread all over the country. From this perspective, vehicles will be in our lives as long as they are on the roads, and this eco-system will grow day by day. Insurance companies are in constant contact with this ecosystem, where thousands of people are employed, and they are working on creative solutions to ensure that it continues to be effective, competent, profitable and efficient.
Whether you agree or not, I think that the motor insurance sales that people need so much and that are so widespread are done by rote. For this very reason, anyone who intermediates in motor insurance sales should have the insurance know-how that this eco-system they represent deserves, and should correctly understand the needs of the insured, explain about other risks that they cannot predict, and provide consultancy. Instead of on-screen insurance from the insurance company's web services, where only the premium is usually compared, they should offer clients who have already taken the time to buy insurance a more informed experience where they are advised, their questions are answered and their consent is sought. If the transaction is made through a digital platform, an apples-to-apples comparison needs to be shown and supported by live help.
I've prolonged it a bit, but I don't want to end without mentioning the sector. Insurance companies, which have been complaining about damage premiums and costs in motor insurance for years, just like in traffic, run a crazy campaign race in motor insurance prices at the end of each year. I would like to look at the low damage premiums after the pandemic and remind you of the painful year due to economic fluctuations, logistics and labor costs in the following year. Vehicle costs at the beginning of the policy increased 2-3 times within 1 year and the entire bill landed on insurers. In recent months, especially in operational leasing, we started to notice single-digit thousandths (o/oo) prices. The commercial approach that throws the turnover in the final stretch and leaves the damages for next year has become a never ending story that repeats itself every year. That's why those wounds never heal. "But the costs are high, how can people buy insurance with this purchasing power?" you might ask, and I agree with you. If, as we all agree, insurance is an important source of funds in the economy and the assurance of our investments, their pricing must be technical and their capital must be strong. And insurance companies should continue to operate safely and with confidence, without the seizure interventions that we have witnessed in recent weeks, which negatively affect reputation and create victimization.
Happy Sunday to everyone.
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