Cooperative Insurance -The TurkishExperience

Although similar structures such as ‘’ahilik’’ – Turkish Islamic guild, ‘’imece’’ – collective work, ‘’vakıf’’ – foundations had been widely and effectively experienced in the Turkish history , the first cooperative in modern context has been established in Istanbul in 1913.

Cooperative movements were then, widely spread out through out the country, from agriculture to building, from tourism to education. Today, 8 million people are taking the advantage of economic collaboration, being participant of 88.000 cooperatives operating in Turkey.

15 % of these cooperatives are about agriculture and the rest are about production in other areas, consumption, credit, building, transportation, education and charity. However there is only one insurance cooperative in Turkey. It is Koru Sigorta.

Cooperatives in Turkey

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Improvement

May 2010 Established with 207 participant

August 2011 Licensed and started policy issuing

December 2011 # of participant 6,731

October 2012 # of participant 69,500

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Corporate participants Kamu-Sen - Union of civil servants with 500,000 members, TOBB – Union of chambers and exchange commodities of

Turkey, Pankobirlik – Union of beet grower with 1,6 million

members, Tire-Süt – Cooperative of milk producers in Izmir with

1,900 members, ESKO Birlik - Union of consumption cooperatives in

Eskisehir with more than 14,000 members, TÜSPAF – Union of chambers of market places KASKON – Confederation of societies in Kastamonu region.

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Principles

Koru Sigorta is a closed cooperative, whereby every insured should strictly be a partner of the cooperative. In other words, Koru Sigorta can insure only her partners as it is so imposed by the legislation.

Every participant partner has to have a minimum one share valuing 100 TL and has to pay it upon receiving the first insurance policy. According to the Cooperative Law Act. 1163, every participant partner has right to increase his/her share up to 5,000 shares.

At the end of the year, if there is a surplus , it may be distributed among the participants according to the Article of the Cooperative.

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Facts & Figures

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Written Premium(000 TL)

# of participant

2,086 6,731

20.175

69.500

At December 31 2011 At October 31 2012

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Facts & Figures

Liquid assets Receivables Liabilities Expenses Equity

1,228

815

3,272

1,335

168

8,690

544

7,950

2,080

2,908

At December 31 2011At October 31 2012

(000) TL

LOB

In the first operational year the propelling product has been Motor TPL which is the most marketable product in Turkey. As the reputation is gained, other products will also be introduced to the market.

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18,280

7031,192

Premium as of October 31, 2012 (000 TL)

Motor Property

Others

Distrubution channels

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17,605

264

2,300

6

Premium as of 31 October 2012 (000 TL) *

Agencies Brokers

Direct sales Banks

Market share

1st 10 Companies 2nd 10 Companies 3rd 10

Companies 31st Company 32nd CompanyKoru Sigorta 33th Company

Premium (mil. TL) 9.038 2.263 592 20 17 12

Market share (%) 75,58% 18,92% 4,95% 0,17% 0,14% 0,10%

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*As of 30 September 2012

Strengths

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Being unique local insurance cooperative Good local setup Support of state and financial authorities Strong and reliable distribution channels As mutual is close to the idea of Tekaful, gain sympathy

from Islamic banking institutions Good relations with other cooperatives Fair and good relations with reinsurers Ability of selling insurance services over web

Weaknesses

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Low working capital Risk engineering and management advice Lack of legislation on mutual insurance Inexperienced staff No presence in engineering market

Opportunities

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Low insurance penetration in personal lines Opportunities raised due to UN’s 2012 Cooperatives year Opportunities raised due to government’s new Strategy

and Action Plan for Cooperatives Relevance of the mutual insurance to religious people Cross selling ability of different insurance products Ability to reach people communities in one move

Threats

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Stiff competition over premium Compelling rules of cooperative legislations

Objectives

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Prioritize to participant’s needs, Spread the risks over # of individuals, Expect and encourage protective behaviors from the

participants, Being convenient organization to a Tekaful Co. bring

service to the religious people,

Niche markets Agricultural cooperatives Retail societies, Labor unions, Chamber of artisans Professional associations, Social associations,

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Marketing

APM (

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Innovation

A kiosk prototype was manufactured to produce policy in case of urgent needs. This kiosk may stand in shopping malls, airports or in other public places and can be able to prepare and to print Motor TPL or TCIP or Travel policies to who ever needs.

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Comparision of the markets

In Turkey In EU In USA

Market share of Mutuals (%) 0,1% 26,1% 50,0%

# of Mutual Companies 1 3.300* 1.400 **

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* amice-eu.org** namic.org

Why mutuals are

promising?

Provide diversity in the provision of insurance

services

Cost effective and sustainable alternative to shareholder-oriented

companies

Have proven resilient in times of crises

Choice of crowds in favor of mutuals for insuring themselves

Mutuals are promising

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What should be done?

• A level playing field should be provided by the legislators.

• Mutual sector should be recognized as a distinct and important actor to enhance Turkish insurance sector as well as Turkish economy.

• As a mutual company we should improve our products and spread the idea of mutuality as the core value.

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Thank You

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