Türkiye: Fall in vehicle prices pushes down motor insurance premiums
Source: Middle East Insurance Review | Jan 2024
There has been a noticeable decrease in new and second-hand vehicle prices in the Turkish automotive market recently.
The decline in prices has caused significant changes in the motor insurance sector, according to a report by Finans Gundem. Motor insurance premiums fell by 7% in the two months to November 2023.
New regulations concerning used cars and higher loan interest rates have led to lower vehicle sales which in turn have resulted in lower vehicle prices.
The new regulations stipulate that the prices of second-hand cars in Türkiye cannot be set higher than the prices of new cars advised by the automotive producers and distributors. This measure, put in place to prevent speculative sales, took effect on 15 July 2023 and has been extended to 1 July 2024. New rules also require a minimum ownership period of six months and a minimum mileage of 6,000km before resale.
According to information from the Insurance Association of Türkiye, average vehicle insurance premiums reached a peak in September. However, by the end of November 2023, there was a 7% decrease in premiums due to the decrease in car prices.
Another reason for the fall in car prices is that exchange rates have stabilised in recent months. The Turkish lira has depreciated sharply against the US dollar for at least 10 years. The lack of currency fluctuations facilitates pricing by insurance companies because the costs to insurers stay stable.
The decline in automobile prices has also contributed to insurance companies keeping claim payments at a more sustainable level and therefore enabling them to reduce premiums.
However, to assess whether these trends are sustainable, other factors in the sector, especially the frequency and severity of traffic accidents, should also be considered.