We all remember exactly when we last paid a pizza delivery person or an air conditioner technician, but for some reason, despite the fact that our insurance agent has been with us for years, most of us probably won't be able to remember the last (or first...) time we reached into our pockets, took out our wallets and paid the insurance agent.
Don't worry, this isn't a collective blackout, but the simple fact that most of us don't pay insurance agents. Not directly, at least. Instead of collecting their wages from consumers, insurance agents make their living from the handsome commissions they receive from a financial institution (usually the insurance company or investment house) whose services they marketed. How good are the fees? NIS 9.5 billion as of 2021, according to a report by the Commissioner of the Capital Market, Insurance and Savings Authority, which amounts to about NIS 11.4 billion in 2023 terms. An amount that, like the rest of a commercial company's expenses, is largely passed on to consumers by charging management fees on our savings.
What are the fineness of the fees? NIS 9.5 billion as of 2021. Silver, Illustrative,
Well, anyway, you're probably saying, good service is worth paying. But don't we deserve to know how much we pay for this service? Today we really don't know, and the current lack of transparency regarding the amount of commission paid to the insurance agent almost inevitably leads to a conflict of interest between agents and savers – whether biased towards the company or product bias and/or bias to action.
An insurance company (or other financial institution) that pays agents the high commissions will automatically become more attractive to agents, some of whom will be happy to recommend it, even if another company is more suited to the needs of the saver. The same applies to different insurance products within the same company – the agent may tend to market those for which he receives the highest commission, and not necessarily the most suitable.
If this is not enough, even in situations where the company and product that offers the agent the highest commission are also the most suitable company and product for the customer, the problem of the agent's bias to action still remains. If the customer who comes to consult with him already has the product in question, it is still possible that the agent will recommend that the saver switch to another product and company, since he receives an additional, especially fat, commission for transferring the balance of the customer's savings to another company.
The Finance Committee hearing, scheduled for April 20, 4, has been canceled. Finance Committee, Photo: Oren Ben Hakon
Bill 1612 attempted to deal with this problem by making two main amendments: setting a uniform commission for each group of products defined as substitute products, which would reduce the agent's bias towards certain products and companies, and imposing an obligation on agents and institutional entities to reflect to the customer the commission paid to the agent – we are the ones who pay for it anyway in the end, so that at least we know what we are paying for.
This is a good bill, and even if it does not solve the problem completely, it certainly reduces it, but the bill did not even come up for discussion. The Finance Committee's discussion on the relevant part of the bill, which was supposed to take place on April 20, 4, was canceled at the last minute, and at this stage it is unclear if and when the issue will be discussed. Who had an interest in canceling the discussion, and is this interest the same as ours, the citizens of Israel, who struggle every day with the rising cost of living? You decide.
Dr. Michael Sarel is head of the Kohelet Economic Forum, and Ariel Feiglin is a journalist and economist
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