Israeli Insurance Agency Fined 10.5 Million Shekels for Illegally Encouraging Early Pension Withdrawals

The Israeli Capital Market Authority announced on Monday a civil fine totaling approximately 10.5 million shekels against Naaman Insurance Agency and its controlling owner and CEO, Naor Naaman. This penalty followed an extensive investigation by the Authority's Intelligence and Enforcement Department, triggered by multiple complaints revealing a systematic pattern of persuading clients to withdraw pension savings prematurely.

The investigation uncovered serious misconduct, including providing pension advice and marketing services without a proper license. Agency representatives misled clients into believing they were communicating directly with institutional managers of their funds. Additionally, agents accessed clients' personal accounts on management company websites without consent, and justification documents were backdated and signed by licensed individuals who never interacted with the clients.

The Authority highlighted the significant financial harm to savers, including excessive fees charged by the agency for services that could be performed independently and for free, exposure to a maximum 35% tax deduction on early withdrawals, and irreversible damage to retirement savings and essential insurance coverage for disability and death.

Following a hearing, Capital Market Commissioner Amit Gal rejected all the agency's claims and upheld the sanctions. Concurrently, a separate audit concerning the agency's insurance activities is ongoing. This enforcement action is part of a broader regulatory crackdown on early pension withdrawals. Recently, a Haifa Magistrate's Court upheld a 5.5 million shekel fine against financial intermediaries operating without licenses and charging up to 20% commissions.

In addition to financial penalties, the Authority has implemented proactive measures, including a mandatory directive issued in June requiring institutional bodies to conduct personal warning conversations with savers seeking illegal withdrawals over 50,000 shekels or send detailed digital notices for smaller amounts. These communications must clarify tax consequences, loss of insurance coverage, and the option to withdraw funds directly without brokerage fees, with explicit client consent documented and retained for seven years before releasing funds.