In the first quarter of last year, the Turkish Competition Authority ("TCA") launched an investigation regarding the vehicle insurance market on the grounds that alleged anticompetitive agreements or concerted practices arose through jointly allocating the market and increasing prices. Thirty-two insurance companies and the Insurance Association in Turkey were under investigation. At the end of the proceeding, the TCA declared that there were no behaviours of undertakings which would cause a breach under Article 4 of the Competition Act. Therefore, the TCA did not impose any administrative fines on the insurance companies which were under investigation.
The subject of the investigation is vehicle insurance which provides coverage against third parties within the context of the general terms and conditions of the Highway Motor Vehicles Compulsory Liability Insurance. It should be noted that it is a mandatory insurance, since motor vehicles without compulsory vehicle insurance are prohibited from being on the road.
At this point, it is worth mentioning the pricing system in the market. Until 2008, the government had the sole competency to determine the amount of the premiums and warrants. Along with the introduction of the Insurance Act in 2007, the competence in pricing was shared amongst insurance companies and the Undersecretariat of the Treasury, which means that insurance companies had only limited authority to specify their premium rates. However, with the amendments made to the tariff regulation, insurance companies have been enjoying the full competence in determining the amount of their premiums since 1 January 2014.
According to data provided by the Insurance Association in Turkey, even though the number of the undertakings who operate in the vehicle insurance market is not very high, it demonstrates a continuous increase during the last several years. Therefore, one may argue that there is no striking fluctuation in this regard. However, premium rates showed significant fluctuations. While premium production decreased to 2.16% from 37.91% in 2014, it reached a peak in 2016, increasing 76.96%. We may conclude that this distinct fluctuation was a precursor to the complaints which initiated the investigation.
There were several allegations on the ground that insurance companies exhibit anticompetitive behaviour in the vehicle insurance market. The allegations on the complaints can be summarized briefly as follows;
- With the application of the new regulations, the amount of the premium in vehicle insurance demonstrated a significant uptrend in the last few years.
- Due to high premium rates amongst insurance companies, customers abstained from insuring their vehicles. Correspondingly, it left local undertakings, which operate in the international transportation sector, in a disadvantaged position compared to their foreign competitors.
- Insurance companies implemented different premium/price rates which may cause the allocation of the market jointly by insurance companies.
In response to this, insurance companies relied on quite similar arguments in their defenses. Initially, they expectedly denied the existence of an alleged agreement or concerted action violating the competition law. On the other hand, their core argument was based on the changing costs in the market. Insurance companies drew attention to recent developments within the insurance market, and they pointed out that recent amendments in the relevant regulations cause an increase in the costs of the companies. Finally, they all denied the allegations regarding the claim that insurance companies intentionally refuse to offer insurance services to customers.
Within the investigation process, the TCA conducted several dawn raids at insurance companies and gathered internal correspondence relevant to the scope of the investigation. According to the correspondence, the TCA observed that cost ratios were inevitably increased within the years in question due to amendments in regulations, litigation initiated against the insurance firms and unforeseen fluctuations in currency. Within this framework, the TCA concluded that none of the documents that were gathered in inceptions could confirm the allegations regarding anticompetitive agreements or concerted practices.
That being said, the TCA decided none of the practices of the insurance companies in question infringe the competition law. By justifying the insurance companies, the TCA mainly stood on the following evaluations;
- Regarding the fluctuation on premium rates, the TCA observed that full freedom to determine the premium rates motivated insurance companies to increase their market share in 2014. Therefore, the premium rates decreased unusually within 2014. This dramatic decrease was the main reason why the ratios show a significant uptrend in 2015. On the other hand, by taking into account that it is a quite homogeneous market in terms of the services provided by insurance companies, the TCA states that it is feasible to encounter similar premium rates among the competitors in the vehicle insurance market. Therefore, the TCA concluded that there is no agreement or concerted action amongst the undertakings to fix the price on the market.
- Within the scope of an economic analysis of the market, the TCA stated that insurance companies consider several factors in determining their premium rates, such as variable costs, data repository, risk analysis and statistical information. Therefore, it is emphasized that there was no evidence to indicate that insurance companies have an agreement or concerted action to share the market illegally.
In conclusion, the TCA decided that there is no evidence to show anticompetitive practice among insurance companies, and the fluctuation in premium rates is reasonable in light of the economic analysis. Therefore, no administrative fine was imposed on the companies.
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