We talked with Zurich Insurance General Manager Yılmaz Yıldız about the effects of the corona virus in all areas of insurance and the general picture for 2020 …
Having closed 2019 better than expected, elementary insurance achieved 19 percent growth in the first two months of 2020. Today, the uncertainty created by the corona virus in many branches prevails in the sector. Zurich Insurance General Manager YILMAZ YILDIZ is cautiously optimistic. With the assumption that the effect of the corona virus will decrease until the summer and treatment will be found, it predicts a growth of 10-20 percent on the elementary side at the end of this year, or even 15-20 percent if the effect of the virus lasts short.
In fact, insurance has made a very good start to 2020. February, 19 percent of Turkey Insurance Association data elements in the life insurance according to the party and was seen 110 percent growth. Now the picture is changing with the effect of corona virus. Yılmaz Yıldız, the general manager of Zurich Sigorta, one of the leading companies in the sector, is cautiously optimistic. Yılmaz predicts with the assumption that the effect of the corona virus will decrease until the summer and treatment will be found. Yilmaz says, “We are trying to be on the optimistic side,” and predicts a growth of 10-20 percent on the elementary side at the end of this year, or even 15-20 percent if the effect of the corona virus lasts short. Looking at the effects of the virus on the insurance industry, health insurance comes first. Today, patients diagnosed with corona virus are treated under state control. In this respect, it has no effect on health insurances. Yilmaz says, “People who thought they had a cold in the past and did not go to a doctor will now go to the doctor for fear of viruses, and the damage may increase in this respect.” We talked with Zurich Insurance General Manager Yılmaz Yıldız about the effects of the corona virus in all areas of insurance and the general picture for 2020:
How will the corona virus, which affects the whole world, affect the insurance industry?
It is not possible to talk about today without talking about the corona epidemic… There was no epidemic affecting the whole world for a long time. Outbreaks such as Ebola, SARS, and MERS that we had experienced before remained regional. Corona had a serious impact in the short term. The main reason is that today we see the intense effects of the disease in the developed economies of the USA and Europe. We hope it will result in the least loss of life. We have already begun to see the economic effects of the virus. Volatility is very high in financial markets. We will experience these effects for a while. It is impossible for the economy not to shrink in an environment where people stay at home and production stops. I am cautiously optimistic. I think the solution for the corona virus will be found and its effects will continue until summer. When we look at the effects on the insurance industry, there is a health insurance dimension. Today, patients diagnosed with corona virus are treated under state control. In this respect, it has no effect on health insurances. During this period, because people are more at home, home accidents may increase. People who thought they had a cold before and did not go to a doctor will now go to the doctor for fear of viruses, and the damage may increase in this respect. I think that every insurance company will do what they need to do without thinking whether the corona virus is included in the coverage or not.
Will there be a decrease in the number of insured in this environment?
There is an increase in DASK purchases in earthquake areas. This epidemic is expected to reflect on health insurances in the medium term as an increase in normal conditions. Those without health insurance may want to buy it. Currently, there is no increase or decrease in the numbers from both the announced figures and our observations on the company side. But it is too early to see these effects… We could feel it from our own sales, now everyone is trying to understand what happened.
In what other branches will it have significant effects?
If companies have collateral, insurance companies cover when a loss of profit occurs due to a business halt or slowdown in production facilities. Today, not only insurance companies all over the world in Turkey that examines how Sariska in this context. However, it is too early to understand what size it will reach. Right now, the picture only seems to be a little more clear on the health side. Airlines, automotive companies announce the decision to stop production. If this spreads to the general public, it will naturally have a lot of impact on insurance companies. There will be technical studies on how much risk is carried.
In fact, this year had started well for the industry. What does the first two months look like?
2020, both the world and in Turkey had started so well. The decrease in global trade wars and the FED’s rate cut created a spring atmosphere in the world. Turkey began in 2019 as growth in the last quarter. We thought it would be a very good 2020 year. The effects of corona virus remains limited for Turkey is still valid prediction. Turkey Insurance Association in the side in the first two months, according to data elements premium growth of 19 percent, 5.9 percent real growth. Of course, things may slow down with March now. It is necessary to look at the elementary side together with life insurances. Especially with the increase in auto and housing demand by 50 percent, loans and therefore life insurance policy sales increased in these areas. In addition, the high demand in consumer loans was reflected in life insurances. As of February 2020, the growth in premium production in life insurances is 110 percent. There may be a decrease in jobs due to the corona virus effect in March and after. But we may not see that much effect in life insurance. Since consumer loans can also be obtained from digital channels, those who need them before leaving home can continue to receive their loans and therefore life insurance.
So what kind of development do you expect in which branch this year?
Let’s talk with the assumption that the effect of the corona virus will decrease until the summer and there will be treatment. Nobody knows, but we try to be on the optimistic side. In this case, I don’t think it will have a huge impact on the growth of the insurance industry in 2020. As at the end of the insurance sector and $ 9 billion a year in Turkey, I still think it would be in the range of 10-20 per cent growth. On the growth side, I do not think there will be very different results from the figures we expected at the beginning of the year. On the elementary side, 50 percent of premium production comes from auto insurances. The corona virus does not cause a big change in the purchase of auto insurances. So it would not be realistic to predict a major change in at least 50 percent of the market. In fact, if the increases in automotive continue in the second half after the epidemic, the positive effect on insurance may continue. The second biggest premium production is fire. Here, too, it would not be wrong to expect an increase in the number of insured, naturally, as the number of houses increases. Commercial and industrial facilities are still in place even if they stop production. In other words, it is not possible for them to cancel their insurance policies or not to buy them. In fact, as the sensitivity will increase in health insurances, this may have a positive effect and sales may increase. There are two areas that will be adversely affected: Engineering and shipping insurance. There was already a general slowdown on the construction side, which may increase. This affects engineering insurances negatively. Also, in the event of a slowdown in global economic activity, we may see a decrease in import, export and logistics volumes, which affects shipping policies. However, the share of these two branches in total insurance premium production is 5-6 percent. In other words, at the end of the year, we foresee a growth of 10-20 percent on the elementary side, or even better if the effect of the corona virus lasts for a short time, 15-20 percent.
Supplementary health insurance was doing very well. What kind of a painting would be in this product?
There are interesting dynamics here. There are three headings in health insurances: classical private healthcare, emergency healthcare that provide only inpatient treatment and complementary health products. 5 years ago the share of classical private health was 70 percent in health insurances, today it has dropped to 40 percent. Within this area, one product eats the other product. A significant portion of conventional private health insurance holders receive complementary healthcare with price sensitivity. Growth in complementary health comes from three companies in which we are a part. The trend continues like this. Emergency health products are also evolving. Taking the good sides of classical private health and complementary health, they are filled with guarantees.
In the light of these, what do you predict will be the profitability for the sector?
As people stay more at home and travel less, it may be that the frequency of accidents on the auto side decreases and thus the damage / premium rates decrease. We do not want to write a plus with the corona virus effect, but it can have a positive effect in this respect. However, as household accidents and those going to hospitals for fear of viruses will increase, personal accidents and health damages may increase. In addition, in commercial insurances, there may be damages paid as a result of loss of profit due to the cessation or slowdown of production. However, when I look at the sum, I think that the pros / cons balance each other. Financial profit will also be small this year due to low interest rates. Profitability is not as good as 2019, but it could be good in 2020.
ACTIVE IN HEALTH
BALANCED DISTRIBUTION30 percent of our premium production comes from auto, 30 percent from fire and 25 percent from accident / health areas. We have a balanced distribution. We support this balance with new products. We are active in complementary and emergency healthcare fields. We will be very active in the upcoming period, we have new products on the emergency health side. We will continue to introduce new products in cyber insurance. We will have surprises in classic auto insurances, especially in agencies and digital channels.
“WE ARE THE BEST” We want to be the best, not the biggest in the industry. We have a market share of 7.5 percent in bancassurance and close to 10 percent in narrow motor own damage side. We have not changed any of our plans for 2020, nor do we intend to do so. We think 2020 will be as good as 2019 for us in both growth and profit. In premium production, we want to grow twice as much as the industry, ie 40 percent, in health, cyber and auto insurances. We foresee a 25 percent increase in the number of policies.
WE WILL GROW BY THE AGENCY
70 PERCENT BANKMore than 70 percent of our business comes from bancassurance. We have been focusing on other business partnerships for the past few years, we have acquired 6 new business partners. For example, our priority operational and financial leasing sector. When all companies were exiting this industry, we entered because we thought it was right. We have a market share of nearly 30 percent in fleet vehicle insurances. During this period, we focus on non-financial business partnerships.
DIGITAL CHANNEL ON THE WAY In addition, agencies still make 70 percent of premium production in elementary insurance. We have been conservative on the agency side so far. This year, we have a growth plan in the classic agency distribution channel. We have prepared the necessary infrastructure and we are starting to grow. In addition, we will soon be commissioning a comprehensive digital infrastructure that will operate entirely on mobile and can provide all insurance needs, after-sales services and claims processes of a customer.