The complete structural overhaul of Turkey’s political and economic system in recent years has given rise to a plethora of new market opportunities, though not without accompanying complications. In light of Turkey’s recent developments, World Finance spoke to Zurich Sigorta’s CEO, Yılmaz Yıldız, about the country’s insurance market and how the leading multi-line insurance provider’s services are ready to capitalise on a country in the midst of change.
How is the current economic and political landscape affecting your business?
Due to well-observed structural reforms and successful macroeconomic policies, Turkey has become one of the fastest-growing economies in the world. We consider ourselves very lucky to be operating here as macroeconomic and demographic trends continue to exhibit strong performance to this day.
Sound economic policies combined with vigorous economic reforms have yielded favourable results, and the economy has sustained robust economic growth over the last decade. Turkey is the 17th largest economy worldwide, the sixth largest in Europe, exhibits strong growth prospects and boasts a dynamic population – 50 percent of whom are under 30 years old.
In the coming decades it is estimated that Turkey will expand upon its current political and economic influence further still and, according to recent forecasts, become the 10th largest economy in the world by 2023.
With strong economic indicators, such as consistent GDP growth (see Fig. 1 above), an increasing disposable income, falling unemployment, low public debt and falling inflation and interest rates, Turkey is expected to outperform numerous developed economies in the coming years. This economic environment – supported by structural reforms – will boost consumption of insurance products, so it can be said with a reasonable degree of certainty that the economic climate lifts Zurich’s prospects in Turkey. Thus Zurich, which operates in 170 countries, considers Turkey to be one of its key priority markets.
What have been the key developments in the market this year?
Turkey’s overall insurance market, including life, pensions and non-life, equates to approximately $24bn, and looks to grow at a rate of near 20 percent per annum. The General Insurance (GI) market, of which we form a major part, has attracted serious sums of foreign investment intended to capture future growth, therefore the number of foreign-based insurance companies operating in Turkey has almost tripled since 2001.
$24bn
The approximate value of Turkey’s insurance market, including life, pensions and non-life
20%
Amount Turkey’s insurance market is expected to grow per annum
$9.5bn
The approximate value of the Turkish General Insurance (GI) market
$35bn
Amount Turkish GI market is expected to increase by 2023
The Turkish GI market grew by approximately 18 percent in 2012 and equated to $9.5bn, which was remarkable given that global growth rates remained stagnant. The market has seen even more impressive gains so far in 2013 and, in brief, it can be said that the GI market continues to exhibit impressive growth.
The GI market’s compound annual growth rate from 2001 to 2012 was 22 percent and is expected to reach as much as $35bn by 2023 from $9.5bn today. I do continue to believe in the great potential of the Turkish insurance market, which is fuelled in no small part by sustainable economic growth. Moreover, Turkey’s low insurance penetration implies that there remains a sizeable opportunity for expansion in the near future to be driven by increased GDP per capita.
Regardless of an overwhelmingly positive outlook, there remains intense and often loss-inducing competition in the market. If you were to look at the Turkish GI landscape, it is clear to see that the market is highly fragmented and plays host to as many as 35 active players.
Consolidation in the mid-term is inevitable. Life is and will be extremely difficult for insurance companies with no captive bancassurance partnerships and/or critical scale. Insurance companies need to focus on implementing better technical pricing mechanisms, more balanced portfolios, better expense management practices and operational efficiency if they are to survive. Overall, the Turkish GI market is expected to continue its upward trajectory in tandem with economic expansion and increasing consumer awareness.
How important is CSR to the insurance sector today?
It is becoming increasingly important for companies to act as good corporate citizens. Consumers believe that increasing the transparency of business practices, and demonstrating positive social and environmental impacts are the two most effective actions companies can take to improve public trust in the private sector.
Our employees, executives and we as CEOs feel good about giving back to the societies in which we operate. We do believe it’s crucial to balance business and society in order to develop mutual and long-lasting relationships with the communities in which we live in. It is like most things in life, society and business, inasmuch as it’s all about striking a balance, as without profits, we would be unable to sustain the business and therefore continue with our CSR efforts.
As with any other company, an insurer needs to demonstrate that it is more than just a profit-generating, abstract entity. It is important for insurers to emphasise the vital role they play in economic and social development, and CSR projects will improve the industry’s reputation and reinforce stakeholder relationships, which, in turn, can increase loyalty, sales and resilience.
Tell us a little more about Zurich Sigorta’s CSR initiatives
Our stakeholders and the public in general have high expectations with regards to CSR, and demand that we play a part in addressing today’s social, economic and environmental challenges head-on.
It is an important issue for Zurich Turkey to be a responsible company
CSR is not only a key ingredient of our strategy, but also a natural component of our operational and strategic functions. We recognise that in order to be a successful business, we must be able to depend upon earning and maintaining the trust of our stakeholders by proactively addressing relevant environmental, social and governance issues.
In Zurich, CSR centres on our commitment to apply our core competencies, insurance and risk management expertise in contributing to the sustainability and welfare of a given community. Put simply, it’s about conducting our business in a way that creates long-term value for our customers, our people, our shareholders and the communities in which we operate.
It is an important issue for Zurich Turkey to be a responsible company as it is fundamental to our long-term sustainability to meet our aspirations to become the best global insurer. CSR is crucial in that it benefits everybody. It builds trust and demonstrates to our stakeholders that we are a sustainable, principled business. It makes us more attractive to talented employees, reassures customers we are trustworthy, and most importantly, makes society as a whole stronger.
We believe in taking care of children and the youth in many of our CSR projects, and therefore we’ve launched several activities in 2013 in which we’ve worked together with children in need. In many of our voluntary activities our participation rate stood in excess of 95 percent of our employees, and went quite some way in helping us to embrace the surrounding community with both sympathy and affection.
What are Zurich Sigorta’s plans for growth in 2014?
Our intentions are to leverage Zurich’s traditional strengths without neglecting the core values of local culture and business. Zurich’s focus will continue to lie with sustainable profits as well as creating value for our customers through excellent services and products. To reach that target we are strengthening our position by enhancing the group’s global power with local strategic business partnerships. This strategy coincides with Zurich Basics, which are integrity, customer centricity, sustainable value creation, excellence and teamwork.
Our goal is to be considered the best insurance company by our customers, employees and shareholders alike, and in line with that vision, we will focus on sustainable and profitable growth. We intend to become more competitive by optimising the benefits of our multi channel and multi segment structure, whether this is through organic or inorganic means.
In an emerging market, the secret to success is to capture favourable demographics through profitable growth, and so we will continue to operate in all segments: personal, small business, commercial and corporate; all distribution channels banks, agents, and brokers, and all through our main lines of businesses. We will continue to invest for the long term in our business, employees, and communities, as a major player with regards to CSR initiatives.
