Regulator takes aim at life insurance marketing ploy
Israel's financial regulator, the Capital Markets, Insurance and Savings Authority, has issued a draft circular requiring life insurers to maintain introductory discounts for the entire policy period, preventing them from expiring after a few years. The authority, led by Amit Gal, argues that low initial premiums exploit customers' present bias and can cause disproportionate harm if health deteriorates. The draft, open for public comment, is expected to take effect in December.
Israel's financial regulator, the Capital Markets, Insurance and Savings Authority, is proposing to ban life insurance companies from letting introductory discounts expire after a few years. The draft circular, issued for public comment and expected to take effect in December, would require insurers to maintain any discount offered at sign-up or later for the entire policy period. The authority, headed by Amit Gal, argues that low initial premiums exploit customers' tendency to favor the present, potentially leading to uninformed decisions. It also notes that health deterioration over time can prevent policyholders from switching insurers, making discount cancellation disproportionately harmful. The article includes actuarial data showing how premiums rise with age: a 35-year-old non-smoking man pays NIS 65 monthly initially, rising to NIS 325 by age 55, with total cost of NIS 100,000 by age 65. The regulator may extend similar rules to other insurance lines, such as health.