Insurance Regulator to Require Verification of Valid Compulsory Coverage for Occasional Drivers

Israel’s Capital Market, Insurance and Savings Authority has issued a draft circular aimed at bringing order to the fast-growing market for short-term car insurance, sold by the hour or by mileage for occasional drivers. The initiative follows public complaints and is aimed especially at young drivers, soldiers, and students who use these products frequently.

The regulator said a consumer distortion developed as temporary app-based policies for property damage expanded rapidly, while insurers did not check whether the driver also had valid mandatory insurance covering bodily injury. That meant a young driver could activate coverage in an app, drive off, and only discover after an accident that the annual compulsory policy covered only older, more experienced drivers. In such cases, the driver could be left driving without valid mandatory insurance, a criminal offense that exposes the driver and family to major financial risk if there is bodily harm.

To address this, insurers will have to actively verify in their systems whether an occasional driver has a matching compulsory policy that is valid, even if it was bought from another company. If not, the company must refuse to sell the temporary property-damage coverage, explain the refusal, and present options for arranging mandatory insurance. The new circular also requires clear disclosure of price and limits, and explicit informed customer consent before the policy is completed.

The authority also wants the products to remain usable at all times, requiring at least one digital way to activate, extend, or cancel coverage 24/7. Another major provision limits the use of personal data gathered through the apps, including vehicle location and trip times, to professional purposes only such as underwriting, pricing, fraud prevention, and claims handling, banning commercial use for targeted advertising or data analysis. The draft will be open for comments until 15 July 2026, and the final rules are expected to take effect one month after publication, applying to new motor policies. The move comes after another intervention by the authority, when supervisor Amit Gal ordered eight insurers, which together hold 75% of the property-damage car market, to cut tariffs within three months after finding prices were too high. The motor insurance sector lost about NIS 1.5 billion in 2022, then swung to profits of nearly NIS 4 billion in 2024 to 2025 after sharp price increases.