The insurance companies are to be the principal competition to the banks in the financial sector, according to a plan outlined by the Bank of Israel Governor David Klein, in an interview on the eve of the holiday with Haaretz .
The governor sees the insurance companies buying the provident funds from the banks, gaining control of the pension funds and becoming the second most important financial intermediary in the economy.
Klein's gift to the banks in return for their separation from the funds and their holdings in the insurance companies, is the ability to market insurance policies, and in particular life insurance, in their branches.
For now, the heads of the insurance companies have hardly made themselves heard on the issue. There is a technical reason for this: Most of them are on vacation in Israel or overseas. But it is likely that once their vacations are over, they will hardly come out strongly in support of Klein's position.
One would think that the insurance companies would jump at the chance to adopt the governor's plan; but their situation does not allow them to start celebrating so quickly.
First, after years of battling with insurance agents over the insane levels of fees, and after being completely dependent on those same agents, this year, for the first time, the insurance companies have finally seen this bond weakened thanks to the generosity of the treasury's insurance commissioner, Eyal Ben Chelouche.
The new method of calculating fees for insurance agents in the life insurance sector has cut the agents' incomes and reduced their leverage with the insurance companies. The banks' entry into the insurance market will weaken the agents even further, but will also set up the banks as competitors in the market - and the banks are a much scarier group for the insurance companies than the insurance agents.
Secondly, three of the four large insurers - Migdal, Clal and Harel - are all 20 percent owned by the big three banks: Leumi, Hapoalim and Discount (in that order).
Therefore; it will be difficult to imagine the managers of those companies (Izzy Cohen, Avigdor Kaplan, and Yair Hamburger) waging a battle against their own shareholders.
Thirdly, and probably the biggest threat: The sale of life insurance in bank branches will lead to the development of simple and cheap products that will be easy to sell without the help of insurance agents.
The success of these products might bring about a drastic drop in the sales of the complex and expensive policies sold by the insurance companies and hurt their profits.
Fourthly, it is reasonable to assume that if Klein's proposals are accepted, the supervision of the insurance sector will increase and the firms will be forced to meet much stricter standards of transparency and supervision.
In particular, these new requirements will apply to the insurance companies if they decide to enter the credit markets, and which it is not at all clear that they know how to do.
So the insurance companies don't view Klein's proposals just as an opportunity, but also as a threat. It seems that from their point of view, and also that of the banks, the present situation is preferable - a division of the financial markets between two sectors, and where each sector continues to milk its own customers separately with no interference.
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