When Israel joined the Organisation for Economic Co-operation and Development (OECD) in 2010, the preliminary review of the country’s financial system noted “significant deregulation” over the preceding three decades. By 2018, however, the organization’s regulatory index indicated a surprising pendulum swing: In the intervening years, Israel’s regulations had created such barriers to trade and investment that it was ranked second-to-last among the OECD’s 35 member countries.
That shift doesn’t surprise Israel’s financial advisors. Yossi Manor, a 30-year MDRT member from Hod Hasharon, calls his country’s regulations “excessive.”
“The regulatory index published by the OECD assesses the extent to which regulation in the various countries encourages the dynamic and competitive economy necessary for the existence of a thriving economy,” he said. “Regulation is one of the key factors influencing the industry.”
Boaz Bar El, an eight-year MDRT member from Jerusalem, is a member of the Pension Committee in Israel Association of Insurance Agents, which lobbies on behalf of the country’s insurance agents. In this role, he participates in negotiations with The Capital Market, Insurance and Savings Authority to modify and ease what his organization deems disproportionate regulations placed on Israel’s insurance brokers.
Bar El notes that while there have always been frequent regulatory changes in Israel, they’ve recently “intensified significantly,” with requirements to extensively justify product recommendations and to make other disclosures.
For Reem Shukha, one of the challenges of the regulatory changes is that they are often “sudden and critical,” and have led to certain products, such as private long-term care insurance, essentially going extinct.
“Insurance agents have been successful in halting certain disadvantageous changes, but not all of them,” said Shukha, a nine-year MDRT member from Nazareth, citing “extensive and radical reforms in the last three years.”
Manor referred to a regulation introduced in 2020 that stipulates that insurance agents must refund commissions if a client cancels their life insurance policy in the first five years. The current regulator has also indicated support for a measure that would standardize the amount of commission an advisor receives, regardless of product type.
These regulations, while burdensome, are arguably necessary. Bar El said there has been a proliferation of unscrupulous actors entering Israel’s insurance scene, including “unskilled telephone receptionists who try to sell insurance products unprofessionally and unethically” and “misleading, false marketing ads that appear constantly in the media.” He said he frequently warns clients about the unforeseen consequences that can come from believing what they hear without input from a true financial professional.
Shukha also has observed the impact of these outsiders trying to enter the insurance sphere.
“Insurance agents and financial planners in Israel are constantly struggling with attempts by non-professional entities, such as credit card companies and retail chains, to enter the industry and sell health, travel and other classes of insurance,” she said.
But of course, not all the regulatory changes have been damaging.
“There have been various regulatory changes, some of which are positive and beneficial to increase transparency in the industry, such as establishing a national pension clearance bureau,” Shukha said. “These changes have, in my opinion, reinforced the need to have all relevant information needed to address the client’s individual needs at the very first meeting.”
She also says it’s important for advisors to keep up to date on what’s going on in the market so they can continue to serve clients fully and build a lasting relationship.
“It’s important to do your best to understand the needs of the client and tailor solutions to their needs,” she said. “It’s also important to appreciate the long-term nature of the agent-client relationship and be available to assist them based on changes to their ongoing needs.”
A desire for this type of longevity is what led Bar El to choose a specialization; his chosen product is annuities designed for elderly clients.
“In my perspective, acquiring specialization in certain products is one of the methods to emphasize your added value among your competitors and resultantly enhance your long-term relationship with your client,” he said.
Manor has taken the concept of specialization a step further. He works with two of his children, who specialize in general insurance and pension and savings products. Manor’s own focus is financial investments and retirement planning.
“The combination of a one-stop shop, together with a boutique specialization, creates in the customer the understanding that there is someone to trust,” he said. “Even today, clients know that an expert in every field is in our office.”
Shukha also calls her agency a “one-stop shop,” although she focuses on providing life, pension and health insurance and works with colleagues to address additional needs.
“I think the key to success in the insurance industry is to offer a highly diverse range of products to the client and maintain professionalism and integrity,” she said.
And all three advisors agree that, especially with all the evolving regulations in Israel, not to mention technological advancements and product changes, adaptability is key to endurance.
“Those who show flexibility will survive and remain competitive,” Manor said. “The rest may find themselves out of the race.”