SEDDK Warns on Motor Package Policies and Extra Cover

SEDDK (Türkiye's insurance and pension regulator) warned insurance companies over package policy and extra cover practices in compulsory motor third-party liability insurance (motor insurance), in sector announcement no. 2024/3 published on 29 August 2024.

Basis of the announcement

The announcement referred to Article 12, titled "Tariffs," of Insurance Law No. 5684: insurance tariffs are freely determined by companies in line with insurance principles and generally accepted actuarial techniques, but the cover amounts, tariffs and instructions for compulsory insurance are determined by the Minister.

The procedures and principles for cover to be given through package policies and extra cover methods in motor insurance had been set out in Circular No. 2019/10 of 19 November 2019. The announcement recalled Article 6 of that circular: premiums for cover falling outside the scope of the Motor Insurance General Conditions and/or provided above the minimum cover amounts must be determined in line with insurance principles and actuarial techniques, and the basis for this must be kept ready for inspection within the company.

Complaints and warning of sanctions

SEDDK said it had received complaints that, in determining premiums for cover given through package policies or extra cover methods, the above legislative provisions were being violated, particularly in some distribution channels. The announcement said the matter was being closely monitored by the institution, and concluded with a warning that insurance companies needed to take the necessary measures urgently to avoid sanctions.

Why was this on the agenda?

Because of the premium cap applied in motor insurance, the pricing of optional cover added alongside the compulsory policy in some sales channels is at times a source of dispute. The announcement was a step formally recalling that the pricing of this extra cover must also rest on technical principles.