Cooperative Insurance - The Turkish Experience

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 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 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

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,

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

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

Facts & Figures

Facts & Figures (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

Distrubution channels

Market share 1 st 10 Companies 2 nd 10 Companies 3 rd 10 Companies 31 st Company 32 nd Company Koru Sigorta 33 th Company Premium (mil. TL) Market share (%) 75,58%18,92%4,95%0,17%0,14%0,10% *As of 30 September 2012

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

Opportunities  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  Stiff competition over premium  Compelling rules of cooperative legislations

Objectives  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,

Marketing APM (

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

Comparision of the markets In TurkeyIn EUIn USA Market share of Mutuals (%)0,1%26,1%50,0% # of Mutual Companies13.300*1.400 ** * 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

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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