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The deal between Social Security and insurance companies will come out of your pocket

Following the new Arrangements Act, starting in 2023 we will all pay more for compulsory car insurance.

The reason?

The National Insurance Institute "gave up" hundreds of millions of shekels to the insurance companies and they are required to return them

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Walla! Car

Tuesday, 17 August 2021, 12:11 Updated: 12:22

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In the current course of events, the relationship between the insurance companies and the National Insurance Institute is of no interest to anyone but the finance officials and the insurance economists. This time, however, it has a direct impact on the pockets of all vehicle owners in Israel. The insurance company recently completed the signing of an agreement under which the companies will be required to return to the National Insurance Institute a great deal of money for the benefits paid by the institution to insured persons injured in road accidents. This is due to the fact that in the event of a car accident, Social Security first pays the benefits to the injured and only then settles accounts with the insurance companies. However, in 2017, the State Comptroller's investigation revealed that the National Insurance Institute waived the insurance companies' hundreds of millions of shekels that they owe it as part of this offsetting. In order to correct this distortion, the arrangement was changed in 2019, and according to the new arrangement, starting in 2023, the insurance companies will pay a fixed percentage of the premiums to the National Insurance Institute.

The idea behind the move was to simplify procedures and also advance the payment by several years.

And since, as in nature, there is no vacuum in the economy, according to the publications, it is likely that due to the development, an increase in the compulsory car insurance premium will be required by between 3-4%.

This is as long as the Supervisor of Insurance does not intervene during.

More on Walla!

You lied you paid: the ruling that will allow insurance companies to waive payment

To the full article

The National Insurance Institute waives to the insurance companies huge sums that were transferred to the insured who were injured (Photo: Reuven Castro)

On the face of it, these are negligible percentages, but when we talk about multiples of market size, this is an aggregate addition that can reach tens and even hundreds of millions of shekels.

The summary of 2020 shows that in the course of it, the insurance companies in Israel collected no less than NIS 5 billion for the sale of compulsory policies when their profits amounted to NIS 424 million and in 2019 - about NIS 1 billion.

Even when looking at the profit margins in the sale of comprehensive policies - it is difficult to shed a tear, even if attached to the eye. According to the data, the automotive industry - property, is the most powerful profit engine for insurers in Israel. This is no less than NIS 8.4 billion that we all paid them, only during 2020, without referring to the additional billions that have accumulated in their funds for payments for the purchase of a mandatory policy. For example, the Migdal insurance company received NIS 778 million in premiums from car insurance, while its profits, less the claims it paid, amounted to NIS 65 million. The other companies also thank every morning for the poor quality of public transportation that forces us to purchase more and more vehicles and accordingly also insurance. According to the data, in 2020, the Phoenix insurance company received about NIS 1 billion in property insurance, while sweeping a profit of NIS 77 million. And so, for example, also in the company AIG, which presented a very handsome profitability threshold: sales turnover of NIS 370 million and a profit of NIS 71 million.

Adv. Assaf Warsaw. The corona year brought very good profitability to the insurance companies due to the small number of passengers (Photo: Regev Kalaf)

Quite unusually, what gave the insurance companies a glittering profit margin was the corona.

Yes, while in many industries there has been a significant drop in turnover and profits, when it comes to the auto insurance industry, the corona has proven to be a real bonanza.

why?

The closures, which significantly reduced the volume of travel.

And when you travel less - you also have fewer accidents.

And what about the year 2021?

Is it also expected to end in a dreamlike way for car insurers in Israel?

"It is difficult to estimate how the year 2021 will end in terms of the profitability of the property automotive industry, but it is likely that the aggregate claims ratio as a result of closures during 2020 will not be maintained during the current year," said Adv. Assaf Warsaw.

According to him, a return to routine means more road accidents, which in turn translate into an increase in the number of claims.

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