Israel to End Temporary Discounts on Life Insurance Policies

Starting in February, Israeli insurance companies will no longer be able to offer temporary discounts on life insurance policies as a lure for new customers. The Capital Markets Authority has issued final directives prohibiting these short-term price reductions, which were typically followed by significant price increases. Under the new regulations, any discount offered will now be guaranteed for at least 10 years, providing consumers with greater price certainty. This represents a modification from the Authority's initial proposal, which would have mandated permanent discounts for the entire duration of the policy.

Insurance companies can still offer discounts for longer than a decade, but not less. The Authority explained that this change will enable policyholders to compare offers more easily and choose the most competitive option, knowing their favorable rate will be maintained for an extended period. The new rules also apply to additional coverage, such as disability insurance due to accidents.

Furthermore, insurers must now provide policyholders with at least one month's advance notice via SMS and email before a discount period ends or is reduced. This notification must clearly state when the discount will expire, the exact percentage increase in cost, the previous and new discount rates, and the prior and new payment amounts.

In cases where a policyholder wishes to change their policy, for instance, due to a mortgage, the Authority requires companies to ensure there is no double payment during the transition. The Authority highlighted that the previous practice of offering temporary discounts created a false sense of affordability, often leaving policyholders vulnerable when their health changed, making it difficult to switch insurers and retain favorable terms. This could result in them being stuck with expensive, non-competitive policies after the initial discount ended.

Amit Gal, Supervisor of the Capital Markets, stated that the new directives reflect the Authority's commitment to consumer-centric regulation, empowering individuals. He emphasized the importance of maintaining a competitive market while ensuring fairness, transparency, and long-term certainty and security for policyholders.