BTS Contributes to the Economy
File Oct 02, 2020
The Building Completion Insurance (BCI) was created in 2013 to protect consumers due to their victimisation from purchases through prepaid house sales.
The Building Supplementary Insurance is a type of Indemnity Insurance. The General Conditions of Indemnity Insurance, which is an umbrella term with different types based on obligation, refers to seven different types. BTS arose from a completely different point; however, as it simultaneously runs with the Indemnity Insurance in our country, it is now the most popular Indemnity Insurance type.
A new law was introduced in 2013 to protect consumers after they were victimised for buying a house without a title deed. In Article 44 of this law, the payments for the prepaid house sales were required to be guaranteed under the name “Building Supplementary Insurance.” But it is necessary to understand how the Indemnity Insurance works to be able to comprehend the Building Supplementary Insurance. Unlike the bilateral, insured-insurer relationship that we see in the Indemnity Insurance, there is a trilateral structure consisting of beneficiary-insured-insurer in BTS. In Indemnity Insurances, the beneficiary and the insured are always two different parties.
How can we describe BTS?
It will be better to explain BTS with an example. This insurance is based on a trilateral relationship. There is an insured, a contractor and a consumer, i.e. a beneficiary, in this relationship. And there is an insurance company guaranteeing the payments made by the consumer buying the house. In BTS, the insurer stands a guarantor of the contractor for beneficiaries. The contractor pays the premium, but the insurer preserves the rights of the consumer buying a house from that project. In short, the contractor’s promise is taken under a guarantee. “I stand a guarantor for the construction of the house that you have purchased from the X project of A company,” they say to the consumer. If the company cannot finish the project, come and find me.”
The compensation is provided in BTS in two ways. Either the house in question is completed and delivered to the consumer, or the amount paid by the consumer is paid back with the legal interest. BTS was made compulsory by the New Consumer Protection Law No. 6502 issued by the Ministry of Customs and Trade as well as the Ministry of Environment and Urbanisation. Consequently, the Building Supplementary Insurance planned for prepaid house sales started to be used in the Urban Transformation Legislation. But the prepaid house sales are different from the Urban Transformation Legislation. There is no actual house in this system; only lands and some models. Therefore, guaranteeing the payments made here is only possible with the Building Supplementary Insurance. On the other hand, flat owners come into the picture in urban transformation. The building is actually there. People living in it are dispossessed, the building is pulled down and a new one is built. Along with the acceleration of urban transformation in 2019, BTS came to be queried more by consumers. Surely more contractors will need to make this insurance with the increasing consumer demands.
In BTS, we have the element of trust, one of the main features of Indemnity Insurance. Housing contractors set the minds of citizens at rest with the BTS policy by guaranteeing that their payments are secured. Hence, BTS makes the whole endeavour more professional. The contractor gives a bond with the signature of the insurance company and guarantees the commitments by giving consumers the chance to seek their rights in case the commitments aren’t fulfilled. This puts house buyers at ease.
BTS has been implemented since 2017
We made the first BTS policy in Turkey in 2017 with Ziraat Sigorta A.Ş. for Tepe Aura Project of Tepe Inşaat in Ömerli, İstanbul. Since our first project, we have been using it in the projects of many developers in Turkey. We announced some of them and didn’t announce others. Our meetings continue for new projects.
We continue our activities to make Indemnity Insurance popular in the market since 2011. We believe that the Indemnity Insurance will be good for companies, banks and also non-cash diversity with its new premium volume in the contracting capital markets and increase the interest for the product.
Additionally, we have to mention that even in countries that have been using Indemnity Insurance for centuries, not all insurance companies make an Indemnity Insurance policy. This is not like the standard insurance products we are used to. It is really a high-quality financial product.
How is the indemnity insurance implemented?
The insurance company asks for the balance sheet of the company which it will be the guarantor for the Indemnity Insurance. It examines its audit reports and evaluates its past works. It looks at how it uses its assets, its debts and its liabilities. Therefore, Indemnity Insurance and its types contribute to the transparency and corporate identity of companies. What is essential here is to advance the Indemnity Insurance by being a guarantor for the damage-free, correct risks and calculating the risk accurately – in other words, ensuring healthy growth. And we are working hard for this.
We are currently trying to develop our local company working for this product. First, we need to enhance the capacity of the sector with accurate risk analyses. Because, even when insurance companies decide to work in this branch, they don’t have enough knowledge to make this kind of new risk assessment. As Rosenberg & Parker Turkey, we started to offer Management General Underwriter (MGU) services last year. With the MGU service, a model used in foreign countries, and introduced by us in Turkey, we take on the risk assessment processes of the demanding insurance companies and perform the analysis as if we were a unit within them. However, insurance companies may not be a guarantor for every project. This distinguishes the competent from the non-competent. For this reason, we can say that BTS has many contributions to its industry and to the economy.
CEO at Rosenberg & Parker Turkey Meltem Bebekoğlu