Why Arabs Have a Hard Time Getting Car Insurance in Israel

Blame is placed variously on companies’ racism, the disproportionate number of accidents involving Arab drivers and poor infrastructure in Arab towns

Two cars parked in the Bedouin town of Laqiya, August 24, 2019.
Eliahu Hershowitz

Journalist Ahmad Sawis was turned away when he tried to buy comprehensive car insurance from Direct Insurance. The reason? Because he lives in the Bedouin town of Rahat, he said.

On Reshet Bet radio, Sawis, a journalist with public broadcaster Kan, said the company’s reasoning stemmed from racism and stereotyping. Direct Insurance counters that it’s a matter of dry actuarial-risk analysis.

“I’ve had a [car] license since 1994 and I’ve never had a problem like this,” Sawis said. Instead, he got insurance from Harel, where he’d previously been a customer.

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After he spoke about the issue on the radio, other Rahat residents called him and said they’d encountered similar problems. “Direct Insurance hasn’t been offering insurance in Rahat for ages, and other Bedouin towns have similar problems. It’s absurd, because in [the nearby, well-off Jewish town of] Omer, I believe there are more thefts, but I doubt they don’t offer them insurance,” said Sawis.

Direct Insurance responded that in places with increased risk of car theft, they would need to raise premiums in order to compensate, but the insurance regulator doesn’t permit them to do so based on location – and thus the company is forced not to offer insurance to residents of these areas at all. Sawis recorded a conversation with a Direct Insurance representative in which the representative is heard saying that the company likewise doesn’t offer comprehensive car insurance to residents of Jewish towns such as Kadima and Kfar Yona.

Police data suggest, however, that cars in Rahat are not at a particular risk for theft. Over the past few years, the town has had some 20-30 thefts reported each year. It has about 70,000 residents.

An insurance sector source suggested that the issue was not the risk of theft, but rather the driving culture in Arab society. Statistically, areas home to a majority Arab population have higher proportions of accidents.

A source close to Direct Insurance said the company is the largest insurance service provider for Israel’s Arab community, with products such as health insurance and life insurance.

The Israel Securities Authority stated that insurance companies are not permitted to discriminate based on location of residence, and it would examine Sawis's case.

There is a broader issue at play, however. According to industry sources, many Israeli insurance companies do not allow Arab insurance agents to sell their mandatory car insurance policies at all. The insurance companies argue that they’re losing money on Arab customers or on the insurance policies.

These allegations were recently the subject of a High Court of Justice petition.

Sources say that over the past few years, insurance companies Phoenix, Menora Mivtachim, Clal, Harel and Hachshara all blocked several Arab insurance agents from selling mandatory car insurance.

A senior industry figure says the problem relates to all kinds of car insurance, not just mandatory insurance.

“It’s known that the insurance companies are closing their agencies in Arab areas, thus limiting their exposure to the Arab sector, under the argument that these branches are not profitable,” said the source. In the Golan Druze town of Majdal Shams, for instance, insurance agents have no choice because no insurance companies work with them, said the source. Therefore they sell insurance policies from the direct insurance companies – those that generally sell directly to customers, skipping over the insurance agents – to customers who had difficulty registering for insurance via the companies’ own websites.

Adel Matalka, chairman of the Insurance Agents Forum, said that a significant number of Israel’s insurance companies don’t work with Arab insurance agents under the claim that the Arab sector has a disproportionate number of vehicular accidents, but that they have no problem working with them to sell other kinds of insurance, such as life insurance or property insurance. “Arab insurance agents pay a heavy price for this,” said Matalka.

Aatef Adawai, deputy chairman of the Elementary Insurance Committee of the Association of Insurance Brokers and Agents in Israel, said that some 70% of Arab insurance agents cannot sell mandatory car insurance.

Insurance companies are declining to work with Arab-sector insurance agents because they have poor results, said Israel Garty, chairman of the Elementary Insurance Committee. He acknowledged that there are legitimate reasons for the disproportionate number of accidents involving Arab drivers, including the percentage of older cars, poor infrastructure in Arab areas, and the distance from employment centers, which means that many Arab citizens living in northern Israel are forced to drive 200-300 kilometers a day to get to and from work in the Haifa area. He also described the community’s driving culture as “in need of improvement.”

However, insurance companies could identify problematic drivers without cutting off Arab insurance agents as a whole, he says – by blocking drivers who have a history of accidents, which is information available to the companies.

“The agent wouldn’t accept them in any case,” he said. “There’s no reason to block the agents.”

As a result, Arabs can go to agents from their own community to buy various insurance products, but when it comes to mandatory car insurance, they’re often forced to buy from a Jewish agent who may be farther away, or from the pool, which is government-mandated insurance policies that the insurance companies are forced to offer to drivers who are otherwise uninsurable.

Direct Insurance stated in response that it sets its insurance rates based on actuary considerations, and in cases where the risk necessitates a rate higher than the regulator permits, the company is forced not to sell insurance policies. It would prefer to be able to offer these customers insurance at a higher rate, it stated.

It denied that it was acting based on racism or stereotypes.

The Israel Securities Authority stated in response that it was aware of the problems facing the Arab sector and had recently met with Arab insurance agents to discuss the matter. It has no tolerance for discrimination, it stated.