Consumer Protection ThroughConsumer Protection ThroughInsurance Arbitration:Insurance Arbitration:

The Turkish Insurance Arbitration SchemeThe Turkish Insurance Arbitration Scheme

Doç. Dr. Kerim AtamerDoç. Dr. Kerim AtamerKoç University, IstanbulKoç University, Istanbul

Turkish Insurance Arbitration Commission (Member,Turkish Insurance Arbitration Commission (Member,

Board of Directors)Board of Directors)

Problem (1/24)

Turkish General Directorate of Insurance Administration (GDI) notes:

Insurance litigation in Turkey →→

Long duration (5-10 years with appeal)

No specialist Courts

High costs for “consumer”-claimants

Insurers financially capable to have proceedings dragged on.

Solution (2/24)

“Act on the Regulation of Insurance Activities, 2007” (ARIA)Art. 30 in 23 sectionsArt. 30 in 23 sections““Insurance Arbitration Scheme”Insurance Arbitration Scheme”Inspiration: English, Canadian and Scandinavian practice of “insurance ombudsman”“Ombudsman” alien to Turkish law→→ Not “ombudsman” but “arbitration”.

Structure – 1Structure – 1 (3/24)

IInsurance nsurance AArbitration rbitration CCommission ommission (IAC)(IAC)

Board of Directors (BoD), consisting of 5 Board of Directors (BoD), consisting of 5 members who represent:members who represent:

GDI (1)GDI (1)

Associations of Consumer Protection (1)Associations of Consumer Protection (1)

Association of Insurance Companies (2)Association of Insurance Companies (2)

Academic expert on Insurance law (1).Academic expert on Insurance law (1).

Structure – 2Structure – 2 (4/24)

Staff:Staff:DirectorDirectorAssistant Directors (2)Assistant Directors (2)Sufficient number of “Reporters” Sufficient number of “Reporters” specialising in life and non-life insurance specialising in life and non-life insurance (currently 1 / 2)(currently 1 / 2)Office personnelOffice personnelExternal:External: Arbitrators specialising in life Arbitrators specialising in life and non-life insurance.and non-life insurance.

ArbitratorsArbitrators (5/24)

Requirements:Requirements:

Higher education of at least 4 years andHigher education of at least 4 years and

““Insurance law” experience of at least 5 Insurance law” experience of at least 5 years oryears or

““Insurance practice” experience of at least Insurance practice” experience of at least 10 years10 years

→ → Not admitted (Not admitted (e.g.e.g.): medical doctors, ): medical doctors, engineers, mechanics.engineers, mechanics.

AdmittanceAdmittance (6/24)

Potential arbitrator:Potential arbitrator:Application to IAC → if approved:Application to IAC → if approved:Submission to GDI → if approved:Submission to GDI → if approved:Registration in the “List of Insurance Registration in the “List of Insurance Arbitrators”Arbitrators”Separate lists for life and non-life.Separate lists for life and non-life.Currently: 14 / 123Currently: 14 / 123Lists kept by the Ministry of Justice.Lists kept by the Ministry of Justice.

SubscriptionSubscription (7/24)

Entry in the Insurance Arbitration Scheme: Entry in the Insurance Arbitration Scheme: notnot mandatory mandatory

Should “insurer” wish to subscribe:Should “insurer” wish to subscribe:

(1) Written Agreement with IAC and(1) Written Agreement with IAC and

(2) Payment of subscription fee.(2) Payment of subscription fee.

Annual fee: about € 10,000Annual fee: about € 10,000

GDI: “subscription = positive criterion in GDI: “subscription = positive criterion in annual evaluation”.annual evaluation”.

Current SCurrent Status (8/24)

GDI comment →→ strong incentive to enter

Currently: 62 companies / 46 subscriptions

Life: 24 companies / 17 subscriptions

Non-life: 38 companies / 29 subscriptions

Premium: 91% of total premium

→ → Majority of “active market” subscribed.Majority of “active market” subscribed.

System operating since:System operating since: 21 August 2009 21 August 2009

Applicant – 1Applicant – 1 (9/24)

Application to arbitration schemeApplication to arbitration scheme

Admitted only in respect of:Admitted only in respect of:

““Claimant against insurer” =Claimant against insurer” =

Policyholder, insured, beneficiaryPolicyholder, insured, beneficiary

Victim against liability insurerVictim against liability insurer

Subrogated property insurer (Subrogated property insurer (e.ge.g. fire, hull) . fire, hull) of victim against liability insurer.of victim against liability insurer.

Applicant – 2Applicant – 2 (10/24)

““Claimant”:Claimant”:

NotNot limited limited to “consumer” → to “consumer” →

Open to Open to e.g.e.g. traders, banks, shipping traders, banks, shipping companies, every other business venture.companies, every other business venture.

Original intention?Original intention?

Not clear from the legislative history.Not clear from the legislative history.

Practice (non-life):Practice (non-life): number of non- number of non-consumer claimants increasing.consumer claimants increasing.

Non-ApplicantNon-Applicant (11/24)

Right of application not admitted to →Right of application not admitted to →

““Insurer” as “claimant” against Insurer” as “claimant” against e.g.e.g.::

Policyholder for premium,Policyholder for premium,

Insured for return of excessive payment,Insured for return of excessive payment,

Third party, who is not an insurer of legal Third party, who is not an insurer of legal liability, in pursuit of subrogated claim.liability, in pursuit of subrogated claim.

Ordinary Court proceedings required.Ordinary Court proceedings required.

Pre ConditionPre Condition (12/24)

Claimant must firstly apply to Insurer.Claimant must firstly apply to Insurer.

If application rejected, orIf application rejected, or

Insurer silent for 15 working days:Insurer silent for 15 working days:

Right given to invoke insurance arbitration.Right given to invoke insurance arbitration.

Application to be filed with IAC.Application to be filed with IAC.

Printed application form: published on Printed application form: published on IAC’s website.IAC’s website.

Arbitration AgreementArbitration Agreement (13/24)

Required and sufficient:Required and sufficient:

Insurer subscribed to the SchemeInsurer subscribed to the Scheme

= Agreement concluded with IAC.= Agreement concluded with IAC.

Arbitration clause deemed to be included Arbitration clause deemed to be included in all subsequent insurance contracts.in all subsequent insurance contracts.

No individual arbitration agreement No individual arbitration agreement required in the contract, policy or required in the contract, policy or information form.information form.

Application FeesApplication Fees (14/24)

Basis: amount of claimBasis: amount of claim

€ € 1 - 2.500: € 17.51 - 2.500: € 17.5

€ € 2.501 - 7.500: € 502.501 - 7.500: € 50

€ € 7.500 + : € 1257.500 + : € 125

No other payment requested from claimantNo other payment requested from claimant

= light financial burden.= light financial burden.

Review by ReporterReview by Reporter (15/24)

Receipt of application →Receipt of application →First stage: review by Reporter (life / non-First stage: review by Reporter (life / non-life)life)Time limit: 15 days.Time limit: 15 days.Scope of review: two stepsScope of review: two stepsProceduralProceduralMissing documentsMissing documentsAccepted: Appointment of arbitrator(s).Accepted: Appointment of arbitrator(s).

TribunalTribunal (16/24)

Constitution: BoDConstitution: BoD

€ € 1 – 7,499: single or 31 – 7,499: single or 3

€ € 7,500 + : 3 arbitrators7,500 + : 3 arbitrators

Appointment: from the list in accordance Appointment: from the list in accordance with turnwith turn

Exception: if arbitrator in turn not “expert”, Exception: if arbitrator in turn not “expert”, then next “expert” (e.g. marine insurance)then next “expert” (e.g. marine insurance)

Also: geographical aspects, work load.Also: geographical aspects, work load.

Procedure – 1Procedure – 1 (17/24)

Principle:Principle: Documents only (Art. 30 AIDA Documents only (Art. 30 AIDA sec. 15 sent. 8).sec. 15 sent. 8).GDI:GDI: Tribunal may hold hearing in its Tribunal may hold hearing in its discretion (Directive, 2009)discretion (Directive, 2009)““Provisions of Code of Civil Procedure on Provisions of Code of Civil Procedure on Evidence are applicable” (Directive, 2009)Evidence are applicable” (Directive, 2009)If so: witness hearings, experts, visit of site If so: witness hearings, experts, visit of site etc. must all be admitted.etc. must all be admitted.Conflicting views among BoD members.Conflicting views among BoD members.

Procedure – 2Procedure – 2 (18/24)

Practice:Practice: Tribunals make use of all Tribunals make use of all provisions on Evidence.provisions on Evidence.

Time limit for Award:Time limit for Award: 4 months 4 months

Parties may extendParties may extend

If not observed: arbitration null and void, If not observed: arbitration null and void, renewal not admitted → Court decision renewal not admitted → Court decision required.required.

3 arbitrators:3 arbitrators: Majority decision sufficient. Majority decision sufficient.

Fees of TribunalFees of Tribunal (19/24)

€ € 1 - 7,499: 3% of claim for each arbitrator1 - 7,499: 3% of claim for each arbitrator€ € 7,500 +: 2% of claim for each arbitrator7,500 +: 2% of claim for each arbitratorMin: € 112,5 – Max: € 500Min: € 112,5 – Max: € 500(Annual adjustment by Treasury allowed.)(Annual adjustment by Treasury allowed.)Payment by IACPayment by IACFunding: Insurer pays total fee up-frontFunding: Insurer pays total fee up-frontAward in favour of Insurer: 50% refundAward in favour of Insurer: 50% refundFirst 30 files annually each Insurer: free.First 30 files annually each Insurer: free.

Appeal – 1Appeal – 1 (20/24)

Grounds for appeal distinguished:Grounds for appeal distinguished:

1.1. Appeal on material grounds: Appeal on material grounds:

a) Final and binding: up to € 20,000 (may a) Final and binding: up to € 20,000 (may be increased by the Parties)be increased by the Parties)

b) Appeal admitted: € 20,001 +b) Appeal admitted: € 20,001 +

Limit = amount awarded (dismissed?)Limit = amount awarded (dismissed?)

2.2. Appeal on procedural grounds: in any Appeal on procedural grounds: in any event.event.

Appeal – 2Appeal – 2 (21/24)

Appeal to: Supreme Court (Chamber 11 on Insurance law)

Soon (?): Court of Appeal as 2nd instanceAward enforceable despite appeal,Unless Insurer puts up security to stay

enforcement.Practice so far: appeals dismissed on the

grounds that “no material or procedural errors detected”.

Outcome Statistics (22/24)

Majority of claims (1590 as at 31.3.2011): motor-liability, auto, fire, health, theft

Non-life: 94%Application by real persons: 83%Application without an attorney: 88%Awards: 28% admitted, 39% partly admitted,

33% dismissed (increasing)Duration (days): 1-30: 33%; 31-60: 28%;

61-90: 19%; 91-120: 20%.

Funding of Scheme (23/24)

Insurers: annual subscription fee & Tribunal’s fees (after 30 cases)

Claimants: application fees (minimal)Rest: “Security Fund” (= pool)= Deductions from compulsory insurance

(liability or otherwise) premiums:Insurers: 1% of gross premium revenuePolicyholder: 2% of net premium.

ConclusionConclusion (24/24)

Comparison to ordinary Court litigation:Speed & costs: most favourable to

ClaimantsQuality of proceedings: not worse than

before CourtsProblem areas: mostly proceduralLaw in the making→ → Revisions to be expected soon.Revisions to be expected soon.

Consumer Protection ThroughConsumer Protection ThroughInsurance Arbitration:Insurance Arbitration:

The Turkish Insurance Arbitration SchemeThe Turkish Insurance Arbitration Scheme

Doç. Dr. Kerim AtamerDoç. Dr. Kerim AtamerKoç University, IstanbulKoç University, Istanbul

Turkish Insurance Arbitration Commission (Member,Turkish Insurance Arbitration Commission (Member,

Board of Directors)Board of Directors)