The Regulation on Activities to be Evaluated Under Insurance Services and On Distance Insurance Contracts ("Regulation"), published in Official Gazette no. 31513 dated 16 June 2021, aims to determine the procedures and principles regarding insurance activities and activities that do not fall under this scope, insurance contracts concluded to the benefit of consumers, insurance contracts concluded without the physical gathering of the parties and insurance contracts offered in relation to the sale of goods and services.
THE INSURANCE ACTIVITY AND INSURANCE CONTRACTS CONCLUDED IN FAVOUR OF THE CONSUMER
Prohibition to carry out other activities
According to the provisions of Article 5 of the Regulation, insurance and pension companies providing an insurance coverage cannot transfer to third parties their primary obligation of performance of the insurance contract, i.e. their obligation to carry the risk and to compensate once the risk is realised, with the exception of reinsurance contracts. The same Article emphasises that insurance companies cannot carry out activities other than the insurance operations and the activities directly related to it, and that the provisions of this Article will also apply to reinsurance companies.
Contracts and activities that cannot be evaluated under insurance services
Pursuant to the provisions of Article 7, those activities devoted to the compensation within the scope of Article 1401 of the Turkish Commercial Code ("TCC") no. 6102, will be qualified as insurance services, regardless of their name. The same article states that insurance activities will only be carried out by insurance companies, pension companies giving insurance coverage, reinsurance companies and persons and establishments offering insurance services in accordance with their special laws. It also specifies that the carrying out of these insurance services by other persons will be deemed an unauthorised insurance service and will thus be subject to a criminal sanction.
Insurance contracts concluded to the benefit of consumers
Article 8 of the Regulation highlights the conditions to be met in insurance contracts concluded to the benefit of consumers. Accordingly, if the insurance contracts within the scope of the said article are awarded to the insured in a service package, the premium amount of the insurance product cannot be directly or indirectly collected from the consumer. Otherwise, the collection of the premium from the consumer will be deemed an unauthorised intermediary activity and will be subject to a criminal sanction.
DISTANCE INSURANCE CONTRACTS AND INSURANCES OFFERED IN RELATION TO THE SALE OF GOODS AND SERVICES
Distance insurance contracts
Article 9 of the Regulation emphasises that the authorised establishments that conclude or mediate the conclusion of distance insurance contracts through a remote communication tool shall have the necessary and sufficient organisational and technical infrastructure, and that intermediary institutions are also included in the scope of the provision. However, the "obligation to inform the Ministry of the necessary and sufficient organisational and technical infrastructure", which was present in the previous regulation, has been repealed.
It is further specified that the provisions of the Regulation on Informing in Insurance Contracts will also apply to distance insurance contracts and that the obligation to issue policies as regulated under the TCC can also be realised for these contracts through a permanent data logger.
Regarding the marketing and sale of goods and activities, paragraph 4 of the aforementioned article stipulates that the goods and services of insurance and pension companies giving insurance coverage, other than the insurance policies provided under Article 10, cannot be put on the e-market where goods and services are marketed or sold, excluding the authorised institutions' e-commerce environments. Authorised institutions can nevertheless place advertisements in these environments.
The last paragraph of the same article provides a significant regulation emphasising that, in principle, a distance insurance contract is concluded by the insured using the remote communication tool in person. Subsequently, in workplaces belonging to real and legal persons other than the authorised institutions, it is not possible to mediate the conclusion of insurance contracts by using remote communication tools by persons who are not among the technical staff. The violation of this prohibition will be once again subject to criminal sanction, as it is defined as an unauthorised intermediary activity.
Under the Regulation, the "3D Secure" system included in the previous regulations and required for collections made with debit and credit cards, is no longer a necessity, and the obligation to provide the technical infrastructure required for this system has thus been abolished.
Lastly, the statement made by the Insurance and Private Pension Regulation and Supervision Agency ("IPPRSA") regarding the provisions of the Regulation underlines that, in the new and abovementioned regulations, the authorised institutions are only allowed to sell in their own electronic environment, and that they are only allowed to place advertisements in other electronic commerce environments. The purpose is to help approximately 16,000 intermediary institutions to adapt easily to the digitisation process affecting all sectors.
Insurance offered on the sale of goods and services
Article 10 of the Regulation determines the conditions for providing electronic device, machine breakage and theft insurance to be realised after the sale of devices such as computers, tablets, mobile phones and white goods. Accordingly, it is required that:
- the insurance is complementary to the goods or services sold and is purchased together with the devices listed above or in connection with the same device after the sale;
- the annual premium for insurance does not exceed the amount to be calculated by taking into account the change of the Consumer Price Index at the end of each year, as compared with the amount in December of the previous year;
- the coverage term is a maximum of two years, except for insurance offering an extended warranty coverage.
Another provision aimed at preventing unauthorised intermediary activities is in paragraph 3 of Article 10, which states that one cannot act in any way that shows or creates the impression that the insurance coverage has been provided by companies other than insurance companies and pension companies providing insurance coverage, and that such statements cannot be included in the contract that forms the basis for the conclusion of the insurance contract.
Paragraph 4 of the same article makes a distinction between offering an insurance policy in-store and offering it in the e-commerce environment; the conditions for offering it in the electronic commerce environment have been determined.
The obligation of insurance companies to inform and issue policies is also regulated, and must be fulfilled through call centre or permanent data logger.
The Regulation states that the insurance premium will be collected together with the goods sold and will be transferred to the insurance company. In this case, the amount of the insurance premium will be shown separately in the payment document. If the premium is paid in cash or by means of a bill of exchange, the insured will also receive the premium collection receipt, either in printed form or through the permanent data logger. The payment will thus be deemed to have been made to the insurance company.
Pursuant to paragraph 7 of the same article, the service fee to be paid to insurance providers in connection with the sale of goods and services cannot be linked to the premium.
The Regulation also imposes certain obligations on the authorised institutions under Article 10, and makes it mandatory for these institutions to take all the necessary precautions and to keep all information and documents ready for inspection. Again, it is stipulated that IPPRSA will be informed by the authorised institutions one month prior to the implementation under the scope of Article 10, and that IPPRSA may request changes in practice when deemed necessary, without prejudice to the administrative sanction decision.
Security measures in premium collection
Article 11 of the Regulation specifies that the authorised institutions will be responsible for designing processes in accordance with Law No. 5464 on Bank Cards and Credit Cards, Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions and their secondary legislation, and for providing necessary and sufficient security precautions in premium collections for distance insurance contracts.
With this Regulation, the Regulation On Activities To Be Evaluated Under Insurance Services, On Insurance Contracts Concluded In Favour Of The Consumer And On Distance Insurance Contracts published in Official Gazette no. 28982 dated 25 April 2014 was repealed. Business processes carried out in accordance with the repealed regulation must be brought into compliance with the new Regulation by 1 September 2021.