Changes to traffic laws show weakness of Turkish middle class

Deputy Prime Minister Şimşek recently announced that the 2017 changes to traffic (third party) insurance legislation for high-risk drivers will be maintained in 2018.

The changes are important as they impact all Turkish drivers. But they also deserve attention as they serve as a textbook example of populism, prioritizing the short-term interests of high-risk drivers over the long-term interests of the wider society.

The first change to the legislation came in April, when a “ceiling price” was set for the premiums of high-risk drivers, including drivers of cabs, minibuses, commercial buses and trucks, who have a higher record of traffic accidents. The decision was a response to the discontent raised by drivers’ guilds and the guilds of small merchants who fall into this category and were unhappy with high premiums demanded by insurance agencies.

In a context where amnesties for traffic crimes are routine and traffic laws are only arbitrarily enforced, high insurance premiums, one of the few deterrents for reckless driving in Turkey, must have appeared too stringent to high-risk drivers. For them, the solution was government intervention. Government officials must have resonated with them. In April 2017, Şimşek announced the government’s decision to step in to pull down their premiums to a “reasonable” level by introducing ceiling prices.

The decision was celebrated by high-risk drivers. They largely ignored the fact that lower premiums, which come with lower coverage, could place them at a higher risk against liabilities that may arise from bodily injuries they may cause to third parties who could sue them for medical expenses, long-term nursing care, or lost wages.

This risk, which can be a nightmare for drivers in societies with stronger rule of law, does not seem to bother many in Turkey, where courts rarely award plaintiffs such high amounts in liabilities. But it was even more surprising that safe drivers did not object to the legislation either. Laws must deter crimes and the new legislation was doing the opposite. This should have bothered ordinary, risk-averse drivers, but they remained silent.

The only significant reaction to the new legislation came from insurance agencies who refused to insure high-risk drivers at such low prices. As Şeniz Sonbay from Allianz Insurance Agency explained, it was impossible for insurance agencies to keep previous profit levels with the new ceiling prices, so they began to turn down high-risk drivers.

In response, the government intervened again. In July the government announced that all insurance agencies had to serve a certain number of high-risk drivers through a state-assigned “pool” system. This “pool” would distribute the risk somewhat fairly among various agencies, but the risks were still high as ceiling prices remained.

Under these circumstances there were only a few options left for insurance agencies to protect their profits. As one anonymous insurance agent has admitted, the agencies now have to offset their losses by demanding higher premiums from safe drivers than what they would otherwise charge. One may expect citizens who fall in the low-risk categories to object to this new equilibrium but they did not.

As government officials highlight, state-assigned pools for high-risk drivers are not unique to Turkey. However, the specifics of the Turkish system distinguish it from other examples such as the U.S. system, which government officials often refer to. In the latter, state-assigned pools are considered as a “last resort” by high-risk drivers, due to their higher premiums and other disadvantages compared to the voluntary market. In contrast, in the Turkish case the pool seems to do a favor for high-risk drivers - at the cost of safe drivers.
As it is, the legislation needs serious reconsideration.

At present it places the demands of high-risk drivers over important societal interests, such as the elimination of reckless driving and an overall respect for traffic laws. In a society with a stronger, unified middle class, populist legislation such as this one would face objections. But its silence - despite such a direct violation of its interests - once again demonstrates the weakness of Turkey’s middle class.