On Tuesday, premiums on compulsory vehicle insurance will drop by 6.5 percent, and on November 1, they'll slide a further 3.5 percent. That's a 10 percent cut in one year, and there's no other product in the economy that has become so much cheaper.
But the story is even more dramatic, because the insurance companies fought tooth-and-nail against the sector reforms, threatening that the reforms would actually lead to an increase in insurance premiums and the collapse of the compulsory auto insurance market. Some MKs and journalists actually fell for this.
The reform saga began in 1997 when the Knesset passed legislation that shut down the Avner insurance entity, canceled the uniform premium, transferred insurance risk to each individual insurance company, and introduced the concept of competing for the driver's purse. But the insurance companies joined a united front against the law, managing to frighten the politicians, who delayed the implementation. Their ulterior motive was to keep Avner - that strange hybrid which they own - alive. Avner has provided those companies with the perfect cartel that prevents competition, leaving the incumbents to celebrate at the public's expense by concocting a variety of schemes spreading Avner's expenses: If Avner made profits, the companies divvied them up among them, but when there were losses, they made sure the Knesset increased premiums on the compulsory policies.
As part of their anti-reform campaign, they drummed up an expert opinion claiming that Avner's reserves were too low, and that the company was on the brink of collapse. And now what do we learn? That Avner has actuarial surpluses of NIS 1.5 billion, and since the company's activities are now under state receivership, the government has made the most successful deal in its history: it has a profit of NIS 1.5 billion that allows Finance Minister Benjamin Netanyahu to cut compulsory insurance premiums by 3.5 percent, that will continue to be cut, passing on part of Avner's profits to the driver.
The first part of the reforms (guarded competition) came into effect in January, with the full-blown version beginning next week when the companies will start differential tariffs reflecting the varied risks of different drivers. Premiums will be charged according to a number of factors, including age, sex, driving history, previous accident rate, license points, and whether there are air bags in the car.
And so the absurd case of charging the same premium to the driver involved in an accident, who drives with his eyes shut, and to the world's most careful driver, who has never been involved in an accident, will come to an end.
Naturally the new system will encourage safer driving on the roads and will reduce the number of traffic accidents, because when you hit the driver where it hurts, in the pocket, by forcing him to pay NIS 700 more a year, then he will finally understand to get his act together - a more effective method than the alarming advertising blitz presented by the media.
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