Israeli Regulator Proposes Ending Temporary Discounts in Life Insurance Policies

The Israeli Capital Market, Insurance and Savings Authority, led by Amit Gal, has issued a draft directive aimed at ending the practice of temporary discounts offered by insurance companies on life insurance policies. According to the draft, insurers would only be allowed to offer discounts that remain valid throughout the entire duration of the policy. Any additional discounts granted must also apply for the full insurance term.

This move seeks to curb the common industry practice where companies attract customers with significant initial discounts that last only a few years, after which premiums rise sharply. This often leaves policyholders with reduced bargaining power and unexpected cost increases. The regulator noted that such discount structures appeal to customers’ preference for immediate savings but may impair their ability to make fully informed decisions considering the total long-term cost of the policy.

The authority emphasized that life insurance policies are typically long-term commitments and that policyholders face "barriers to switching" due to health changes over time. Losing a discount mid-policy could harm those whose health has deteriorated, making it difficult or expensive to obtain comparable coverage elsewhere. The directive aims to protect consumers from these risks by ensuring discount consistency throughout the policy period.

The draft is part of broader efforts to improve transparency and fairness in the insurance market, addressing concerns that temporary discounts distort customer decision-making and lead to higher long-term costs. The authority is now seeking feedback before finalizing the new rules.