Treasury Reverses on 'Managers Insurance' Policy

Will continue to allow policy buyers to choose their heirs

The insurance commissioner at the Finance Ministry, has decided against intervening in the personal life insurance market: policy buyers will be able to choose their own heirs freely, as is the case now.

Yadin Antebi had been considering a reform of the life insurance policies commonly known as "manager's insurance", in which buyers could not choose their heirs. They were confined to leaving their savings to their widow, widower or children.

Antebi had also considered limiting the type of payment to heirs: instead of a lump sum, spouses would receive an annuity for the rest of their lives.  The insured's dependent children would receive regular payments until they come of age. In practice, such decisions by the treasury would force the pension fund model on this kind of insurance policies. Here too he has abandoned any intentions of reform.

Today, such insurance policies have no limits as to the percentage, or amount, that can be paid toward life insurance, with the rest going to retirement savings.

The customer can choose to divide up his insurance contributions in any manner, including choosing no life insurance at all, with all the money going to retirement savings.

Also anyone can be chosen as a beneficiary, including various bodies such as a company.

Therefore, such "managers insurance" policies often promise nothing to the insured's family in case of early death.

This is because the policy is a contract between the insurer and the insured, and the payments can be divided up in any way to which the two sides agree.

Any intervention by the treasury's supervisor of insurance in such contracts is very problematic; nevertheless, the move is still being considered for social reasons.

The state subsidizes pension savings for its citizens through tax breaks, to encourage people to save for retirement.

But the state's social-welfare interests also include taking care of widows and orphans after the household's main bread-winner dies early, as well as in cases of serious disability or work accidents.

Such worries about dependents and survivors exists today in the pension funds, which require a minimal level of such insurance in case of early death or disability, and such payments are made only to the immediate family.

Since the state subsidizes such payments via tax benefits, it feels justified in demanding the changes in insurance policies. But the change would raise the prices of such policies.

However, the commissioner has still not yet decided whether to intervene in the insurance market over the matter.

Another possible change under consideration is whether to require pension funds to alter the disability insurance they offer.

Now such coverage is based on the ability of the disabled person to work in any reasonable job - a very unclear and confusing definition, open to wide interpretations by lawyers and the courts - and makes the insured dependent on the fund's goodwill.

Such a definition could be changed to require the disability to apply to the insured's specific occupation, as is the case with insurance policies, but this would make the pension funds' insurance much more expensive.

The insurance commissioner has not yet decided on changes to disability coverage.