Israel Bans Short-Term Life Insurance Discounts

Israel's Capital Markets, Insurance and Savings Authority has finalized new regulations that will require life insurance companies to maintain any offered discounts for a minimum of 10 years. Currently, insurers often provide substantial discounts for the initial years of a policy, only to gradually reduce or eliminate them later. These new rules are set to take effect on February 1, 2027, and will apply to new discounts on life insurance policies covering death risk and additional coverage. Group insurance policies will be exempt from these regulations. Existing policies with discounts will remain unaffected, and only discounts implemented from February 2027 onwards will be subject to the 10-year minimum duration. For example, a company offering a 30% discount must sustain it for at least a decade, though they will still be permitted to increase the discount or extend its duration beyond 10 years. The regulations protect the discount amount, not necessarily the final premium, meaning monthly payments could still rise if the policy's base rate increases with age, even with the discount held constant. The Authority acknowledges that initial discounts might decrease under the new rules, with companies potentially offering 15% instead of 30% to manage the 10-year commitment. The regulator anticipates that while new customers may pay more in the early years, they will benefit from the sustained discount over time. Insurers will also be obligated to notify customers at least one month before reducing or canceling a discount, detailing the current and new discount amounts and the corresponding monthly premiums. Initially, the Authority proposed requiring discounts to be maintained for the entire policy term, but this was shortened to 10 years following industry concerns about the difficulty of making long-term pricing commitments due to potential changes in mortality risks and costs.