The assessment of deregulations on mtpl market which put on at risk the future of the insurance sector in Turkey

Motor Third Party Liability ("hereinafter, MTPL") insurance is the most important branch in the non-life insurance sector in Turkey. Common fatalistic views of the Turkish Citizens to insurance and low income level cause low insurance penetration rate in the sector and increase the weight of the MTPL in total non-life insurance production for just being a mandatory product. In light of these reasons; significance of this compulsory insurance product rises up day by day. All type of motor vehicles driving on highways like car, truck, bus or minibuses are mandated to get MTPL insurance in accordance with the Highway Traffic Law No. 2918. Despite it is a mandatory product in most of the countries, free market conditions are available on determining rates except for a few countries. Turkey was also one of them which has free market mechanism. Traffic insurance tariffs were freely determined by insurance companies within the scope of the regulation disclosed in 19.6.2013 dated and 28682 numbered official gazette. But, after 04 2017, the regulator decided to set rates and bring price cap to MTPL policies. This paper mainly underlines the impact of the deregulations related to price cap and pool business on MTPL and present the negative impacts to sectoral profitability according to panel data which cover last five years. It investigates companies' behaviors and warns the market for any insolvency cases like Euro Sigorta. It was a vital intervention for the market and also a good example for underlining the effect of the government's intervention and companies' reactions. The main reason for this study to present this regulative change abruptly has removed the free market conditions and devastate the long-lasting hopes for making profit from MTPL business in the sector and it changes the sector structures which highly possible could cause subtle problems in the future", In this study, we will mainly utilize TSB data, regulator disclosures and annual reports of the companies as main materials. As a consequence; we will show some companies which described good and moderate companies share shrinking on the MTPL sector and give up their place to bad and worst companies when combined ratios rise up. Deregulations on the capital requirements open the roads to small companies to produce loss maker product so capital requirements don't deteriorate on the other hand reserves also. At the bottom line, we underline structural deterioration derived from deregulations in MTPL Market.