On August 28, 2015, the Undersecretariat of the Treasury issued its Regulation on Insurance Support Services, comprehensively setting out the rules for insurance companies to outsource ancillary functions. While the Treasury had previously issued several sector announcements with guidelines for insurers' outsourcing activities, this is the first time that the Treasury has compiled the guidelines in a single regulation. The regulation will come into force on November 28, 2015. Under the regulation:
- Insurance and private pension companies may outsource ancillary services that are not central to their insurance business. These services include: (i) technical examinations and controls for underwriting and compensation management, (ii) mitigation of risks and losses, (iii) ancillary services for damage management, (iv) repair, maintenance and spare parts services, (v) assistance services, (vi) health consultancy for compensation management, (vii) medical treatment services, (viii) call center services, (ix) salvage and recourse services, (x) data retention and management services, (xi) product and tariff development services, and (xii) information technology services, provided that an insurance company maintains ultimate control over its design and management.
- Services provided by seconded employees from other firms, legal and tax consultancy services, and advertisement services do not fall within the scope of the regulation and can be freely outsourced.
- Insurance and private pension companies are required to file an annual report with their board and the Insurance Information and Monitoring Center (Sigorta Bilgi ve Gözetim Merkezi) containing information on risk management and a cost-benefit analysis of their outsourced functions.
- Insurance and private pension companies are liable for all damage and losses incurred by policyholders and policy beneficiaries arising from outsourced services. This liability cannot be limited or assigned to service providers. Insurance and private pension companies can request indemnification from service providers.
- The Treasury acts as the regulator for service providers and requires service providers to have sufficient organizational sophistication, technical and human resources, and experience. Service providers must also have a clean track record in all jurisdictions within the last five years.
- Service providers must register with the service provider list maintained by the Insurance Information and Monitoring Center. Service providers that offer their services in Turkey must be incorporated as a Turkish company.
- The rules apply equally to service providers' outsourcing activities.
- Insurance and private pension companies must bring their outsourcing arrangements into compliance with the regulation by August 28, 2016.
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