The final circular of the Capital Market Authority, published yesterday (Sun.), prohibits short-term discounts in life insurance and determines that the discount rate in the policy will not decrease for at least ten years. It turns out that this is exactly the demand raised by the Chamber of Insurance Agents almost five years ago. On January 30, 2022, then Chamber President, shlomo Aizik, sent a letter to the Commissioner of the Capital Market Authority at that time, Dr. Moshe Barkat, on the subject of “Regulation of Granting a Discount in a Life Insurance Plan”. In the letter, the Chamber described the phenomenon that the Authority is trying to stop now. According to it, insurance companies offer discounts on insurance premiums for short periods, in order to “convince” the candidate that the price is attractive. Purchasing by way of “stimulating the insured” with reduced insurance premiums, the Chamber wrote, is liable to mislead the candidate and even place them in difficulty continuing to pay when the discount ends. The Chamber then relied on a move that the Authority had already advanced at that time in health insurance. A draft circular from October 2021 determined that a marketing entity would be entitled to grant a discount in health insurance, “provided that the discount is given at a fixed rate for a period of at least ten years”. The Chamber called this a “welcome move” and demanded that the Commissioner apply an identical directive to risk products in life insurance as well. The rule in health insurance entered the final circular published in September 2022. In life insurance, the issue remained open until now. The new circular, which will come into force on February 1, 2027, is very similar to what the Chamber requested: a non-decreasing discount for at least ten years, similar to health insurance. There is one difference: the Chamber spoke of a fixed rate, whereas the circular also allows a discount that increases over time. In addition, an obligation was established to notify the insured one month in advance before the discount ends or decreases. In the Regulatory Impact Assessment report, the Authority explicitly notes the alignment with health insurance as one of the advantages of the selected outline. According to it, it prevents regulatory gaps between the sectors that might create distortions. This is the same argument raised by the Chamber in 2022. The turn along the way is particularly interesting. In the draft circular of last August, the Authority went further than the Chamber’s request, and proposed that the discount would not decrease throughout the entire life of the policy. Only after the hearing, and in light of the industry’s arguments regarding the risk of committing for decades, did it return to the ten-year outline. In the end, it turned out that the Authority adopted what the Chamber already requested in 2022.
