The Life Insurance Department in the Capital Market, Insurance and Savings Division
regulates and applies enforcement vis-à-vis insurance companies with respect to life
insurance. The department is responsible, among other things, for reviewing life insurance
plans submitted to the Commissioner of Insurance for approval.
On January 1, 2003, the Income Tax Reform took effect, establishing provisions regarding
the imposition of tax on profits earned in savings plans, including the establishment of rules
regarding the withdrawal of moneys from provident funds and life insurance policies.
Legislative amendments following the Reform necessitated amendments to the Income Tax
Regulations (Rules for the Authorization and Management of a Provident Fund), 5724-1964
(see the Division's booklet for 2002).
In light of the Reform's provisions, the amendments to the Regulations and the policy of
the Office of the Commissioner of Insurance, a new structure was defined for life insurance
products sold to the insured as of January 1, 2004.
The new programs include a structural distinction between three components: savings,
insurance and expenses.
The programs are transparent and clear and, for the first time, the insured enjoys the
possibility of knowing exactly the level of expenses that will be collected from him. In
addition, the programs will enable the insured to compare different insurance companies in
terms of expenses and insurance coverage he intends to acquire, and to select the program
that is most suited to his needs.
As part of the regulatory activities, and in response to public appeals received by the Office
of the Commissioner of Insurance relating to the replacement of valid life insurance policies
with new life insurance policies ("twisting"), a circular was published detailing the rules
applying to the insurer and the insurance agent in the sale of a new policy and in canceling
a valid policy.
The circular aimed to clarify to the insured how canceling an existing policy in order to
acquire a new policy would affect their rights. In this case, the agent is obliged to advise the
insured regarding the changes, advantages and disadvantages of such a change, in order to
enable the insured to reach an informed decision as to the viability of twisting.
In addition, a due disclosure circular was issued with a view towards increasing the
information available to insured who plan on obtaining insurance programs intended for a
long period of savings, and enabling them to identify in advance the product in which they
are interested.
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