Insurance can be defined as a safeguard against economic consequences of negative events that may befall natural persons and legal entities.[1] Its goal is to take measures against the consequences of chance or negligence.
Certain technical and scientific principles have been established for insurance policies to serve this function. The fundamental tenet of insurance is to gather the greatest number of natural persons or legal entities exposed to the same or similar risks, collect their premium payments in a pool, and then offer them coverage from that pool. The probability of risk occurrence can be estimated by applying science, such as statistics.
Insurance plays a significant role in both economic and social life with a substantial contribution to the latter. Its advantages include accumulating capital for investments, stimulating trade by encouraging domestic and foreign investors, ensuring equality in national income distribution, and achieving external payment balance.[2]
Insurance did not exist as a concept in ancient history, but its early examples were in use. For instance, the mutual aid funds of Roman merchants were akin to today’s insurance policies[3]. Modern insurance first appeared in the maritime industry with the use of fixed premium insurance in the form of a “maritime loan”. In Europe, marine insurance emerged in Italy with the expansion of sea trade starting in the 14th century, and land insurance was first used in England following the Great Fire of London.[4]
Since the insurance industry plays a significant role in modern commerce, both personal and business insurance are highly developed in Türkiye and around the world. Today, insurance companies provide a wide range of services to their clients, including not only policy drafting but also consultancy such as strategic analysis, finding and solution services. Business insurance consultancy may include a variety of services such as policy management & consulting, policy analysis & reporting, analysis of business activities, determination of risks after analysis, and identification of a premium range.
Top Trends in the Insurance Industry
Top insurance industry trends across the globe indicate that the global insurance market worth US$5 trillion follows a path that can be referred to as a “game changer”, with its cornerstone being the use of artificial intelligence (“AI”).[5] Coming into prominence with the globalization of FinTech firms, Insurtech[6] companies employ new technologies and a better understanding of consumer expectations to boost efficiency in the insurance industry. While some insurtech companies assist incumbent firms in delivering better end products, others provide new opportunities to consumers and drive competition by transforming old players’ portfolios.[7]
Another trend in insurance companies is a system called “CARE” (see below). Insurance companies are now making use of digital means for their distribution channels to enhance customer experience, but few companies can adopt this system on a corporate level. CARE refers to:
- Convenience: Facilitating purchase of insurance policies,
- Advice: Helping customers access to any information they need to make smart purchasing decisions,
- REach: Ensuring that customers reach products when they need them most.
It appears that insurance companies will need to make the switch to digital channels that meet CARE standards to compete in the market in the coming years.[8]
The Current State and the Future of the Insurance Industry
The insurance industry, like other industries, was affected by Covid-19’s direct and indirect impact on people’s daily lives, health, and economies in 2020, when insurers saw a drop in insurance premiums compared to 2019. Covid-19 disrupted traditional insurance policy distribution in some countries but served as a catalyst for further digitalization of insurance services in others.[9]
In the Turkish financial industry, the insurance and private pension segment generated ₺427 billion (4.1%) as of the end of 2021, following the banking industry, which brought in ₺9.2 trillion (89.7%). Other segments generated ₺634.6 billion in total, accounting for 6.2% of total revenue.[10]
Covid-19’s impact on global trade has repercussions for all industries, including the insurance industry. In this context, market participants in Türkiye and elsewhere have taken action to reduce the negative effects of the pandemic and adapt to changes by utilizing cutting-edge technologies. Without a doubt, the insurance industry remains a haven for investors and keeps up with market trends despite all the negative economic effects of Covid-19.
REFERENCES
CAN, Mertol, Sigorta Hukuku Ders Kitabı, 1st Edition, İmaj Yayınevi, Ankara 2005.
KENDER, Rayegân, Türkiye’de Hususi Sigorta Hukuku, 9th Edition (Revised), Arıkan Yayınevi, İstanbul 2008.
NOMER, Cahit & YUNAK, Hüseyin, Sigortanın Genel Prensipleri, 1st Edition, Ceyma Matbaacılık, İstanbul 2000.
Online Sources
https://www.businessinsider.in/the-insurtech-report-how-financial-technology-firms-are-helping-and-disrupting-the-nearly-5-trillion-insuranceindustry/articleshow/60258913.cms.
https://earnix.com/blog/10-insurance-technology-trends-reshaping-the-industry-in-2022/.
https://www.oecd.org/finance/globalinsurancemarkettrends.htm.
https://tsb.org.tr/media/attachments/TSB_SEKTOR_TR21_2807.pdf
https://www.wns.com/perspectives/articles/articledetail/595/top-5-trends-in-the-insurance-industry.
[1] KENDER, Rayegân, Türkiye’de Hususi Sigorta Hukuku, 9th Edition (Revised), Arıkan Yayınevi, İstanbul 2008, pp. 1; CAN, Mertol, Sigorta Hukuku Ders Kitabı, 1st Edition, İmaj Yayınevi, Ankara 2005, pp. 13; NOMER, Cahit / YUNAK, Hüseyin, Sigortanın Genel Prensipleri, 1st Edition, Ceyma Matbaacılık, İstanbul 2000, pp. 14.
[2] CAN, Mertol, pp. 14-16.
[3] KENDER, Rayegân, pp. 14.
[4] KENDER, Rayegân, pp. 14.
[5] See: https://www.wns.com/perspectives/articles/articledetail/595/top-5-trends-in-the-insurance-industry.
[6]The term refers to businesses that make use of cutting-edge technologies and business models to expand the market for insurance services.
[7] See: https://www.businessinsider.in/the-insurtech-report-how-financial-technology-firms-are-helping-and-disrupting-the-nearly-5-trillion-insuranceindustry/articleshow/60258913.cms.
[8] See: https://earnix.com/blog/10-insurance-technology-trends-reshaping-the-industry-in-2022/.
[9] See: https://www.oecd.org/finance/globalinsurancemarkettrends.htm.
[10] See: 2021 Industry Report by Insurance Association of Türkiye, https://tsb.org.tr/media/attachments/TSB_SEKTOR_TR21_2807.pdf (accessed on 23.08.2022).
