Choosing Insurance- English

8/2/2019 Choosing Insurance- English

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DDGENERAL INSURANCE

An nual Repo r t 2000


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CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1. Analysis of Business Results in Property Motor-Vehicle and Comprehensive . . . . . . . . .

Homeowners Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

2. The Compulsory Motor-Vehicle Insurance Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

A. Memorandum of Understanding between the Ministry of Finance and the Insurance

Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

B. Amendment to the Motor-Vehicle Insurance Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

C. April 2001 Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

D. Regulation of Compulsory Motor-Vehicle Insurance Rates through January 2003 . . . . . . .13

E. Crossover Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

3. Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

B. Analysis of Illness and Hospitalization Insurance Business Results . . . . . . . . . . . . . . . . . . .16

C. New Types of Health-Insurance Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

D. Dental Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

E. Purchase of Private Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

F. Group Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Appendices

Appendix 4.1 Memorandum of Understanding, November 13, 2000 . . . . . . . . . . . . . . . . . . . .26

Appendix 4.2 Aids to the Consumer in Buying Health Insurance . . . . . . . . . . . . . . . . . . . . .30

Appendix 4.3 Shopping for Health Insurance: Comparison of Plans . . . . . . . . . . . . . . . . . . . .40

Appendix 4.4 Shopping for Nursing-Care Insurance: Comparison of Plans . . . . . . . . . . . . . .41

Tables

Table 4.1 Distribution of Insurance Premiums, by Insurance Lines . . . . . . . . . . . . . . . . . . . . .5

Table 4.2 Risk Rates in Compulsory Motor-Vehicle Insurance, April 2001 . . . . . . . . . . . . . . .6


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Figures

Figure 4.1 Distribution of General Insurance Premiums, by Insurance Lines, 2000 . . . . . . . . .4

Figure 4.2 Annual Earnings in Property Motor-Vehicle Insurance, 19972000 . . . . . . . . . . . . .6

Figure 4.3 Total Premiums in Property Motor-Vehicle Insurance, 19972000 . . . . . . . . . . . . .7

Figure 4.4 National Automobile Fleet, 19972000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Figure 4.5 Motor-Vehicle Thefts, 19972000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Figure 4.6 Annual Earnings in Comprehensive Homeowners Insurance, 19972000 . . . . . . . .8

Figure 4.7 Total Premiums in Comprehensive Homeowners Insurance, 19972000 . . . . . . . . .9

Figure 4.8 Loss Ratios in Property Motor-Vehicle and Comprehensive Homeowners

Figure 4.8 Insurance, 1997-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Figure 4.9 Business Results in Illness and Hospitalization Insurance, 19992000 . . . . . . . . .17

Figure 4.10 Market Shares in Illness and Hospitalization Insurance, 2000 . . . . . . . . . . . . . . .18


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INTRODUCTION

The General Insurance Department phrases policy and applies regulation and ongoing supervision

in all lines of insurance except for life insurance, and its goal is to ensure a proper market

structure based on fair competition. General-insurance lines include property insurance,

compulsory and comprehensive motor-vehicle insurance, liability insurance, financial insurance

(credit, sales guarantees, etc.), and health insurance (illness and hospitalization, individual

accidents)

Total premiums collected in 2000 were NIS 13.5 billion, All sums in this chapter are adjusted

to December 2000 prices.

of which motor-vehicle insurance accounted for approximately 60 percent. As Figure 4.1 shows,

between 1997 and 2000 there was a an average annual decline of 0.7 percent in insurance

premiums collected in general insurance, with most of the decline in premiums, 1.5 percent,

between 1997 and 1998. Between 1998 and 2000, the annual decrease was 0.3 percent.

1 All sums in this chapter are adjusted to December 2000 prices.


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Table 4-1

Distribution of General Insurance Premiums, by Insurance Lines

(Percent)

Type of insurance / Year 1997 1998 1999 2000 change

General

Insurance

Premiums

1999-2000

(pcg.)

Business property loss\and

comprehensive 1,413,878 1,214,319 1,100,374 1,092,982 -0.7

Comprehensive homeowners 966,167 971,579 953,780 992,462 4.1

Compulsory motor-vehicle 3,575,149 3,770,831 3,697,825 3,759,236 1.7

Property motor vehicle 4,830,772 4,678,734 4,543,498 4,380,224 -3.6

Employers liability 293,466 258,198 254,446 245,441 -3.5

Other liability lines 882,515 842,785 897,098 894,067 -0.3

Individual accident 242,126 221,870 215,622 202,703 -6.0

Illness and hospitalization 699,413 791,197 935,450 1,005,114 7.4

Aircraft and marine vessels 34,073 27,094 27,037 26,211 -3.1

Cargo in transit 151,805 133,508 117,398 110,766 -5.6

Engineering insurance 274,171 250,649 301,284 284,574 -5.5

Credit insurance 89,805 98,348 104,772 68,869 -34.3

Other risks 367,119 356,218 430,147 476,904 10.9

Business originating abroad 2,816 1,189 1,038 579 -44.2

Source: Data from insurance companies annual reports, processed by the Capital Market,

Insurance, and Savings Division

Total 13,823,275 13,616,519 13,579,769 13,540,132 -0.3


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1. Analysis of Business Results in Property Motor-Vehicle and

Comprehensive Homeowners Insurance

Property Motor-Vehicle Insurance

Property motor-vehicle insurance covers property damage sustained by the insureds motor

vehicle or property damage caused by the insured to a third party. The profitability of property

motor-vehicle insurance increased between 1997 and 2000 (Figure 4.2), despite an average

annual decline of 3 percent in premiums (Figure 4.3).

Several factors affected premiums and profitability in property motor-vehicle insurance in

different ways. Competitiveness in the industry motivates insurance companies to lower insurance

rates. However, the growth of the national automobile fleet (Figure 4.4) may contribute to an

increase in insurance premiums collected by the industry, while the decrease in vehicle thefts

(Figure 4.5) reduces the payout of insurance proceeds and, consequently, helps to lower

premiums. As the following figures show, earnings from this form of insurance business rose

between 1997 and 2000 even as premiums collected decreased. Concurrently, the vehicle fleet

expanded by 13 percent, from 1.62 million vehicles in 1997 to 1.83 million in 2000, and thefts

declined by 37 percent, from 46,018 vehicles per annum to 29,038 per annum, respectively.


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Comprehensive Homeowners Insurance

Comprehensive homeowners insurance covers buildings and their contents against damages such

as those caused by fire, theft, water, and earthquake. Insurance taken out by means of the

mortgage banks, as a security that the banks require against the loan, accounts for a large

proportion of homeowners insurance. Earnings slipped from NIS 221 million to NIS 146 million

(34 percent) in 1998 but have been stable since then.


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Loss Ratio in Property Motor-Vehicle and Homeowners Comprehensive Insurance

The loss ratio is the ratio of claims (claims paid during the year plus changes in pending

claims) to net premiums earned (total premiums plus changes in the residual risk reserve).

Figure 4.8 shows that the ratio is 76 percent on average in property motor-vehicle insurance and

41 percent in homeowners comprehensive insurance. The ratio in property motor-vehicleinsurance corresponds to international norms, but the ratio in homeowners comprehensive

insurance is much lower than that standard. This is an indication of market inefficiency, caused

mainly by the way mortgage banks sell this insurance as a side-product in the issuance of

housing loans. The Capital Market, Insurance, and Savings Division is working on regulations

that will increase competition in this insurance line.


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2. The Compulsory Motor-Vehicle Insurance Reform2

In July 1997, the Motor-Vehicle Insurance (Insurance under Conditions of Managed Competition,

Transitional Arrangements, and Directives regarding Avner) Law, 1997 (hereinafter: the Managed

Competition Law), opened the compulsory motor-vehicle insurance industry to competition. At

the core of the model is the transfer of full insurance responsibility (risks in the industry

alongside the likelihood of earnings) from the public to the insurance companies. The existing

premium-adjustment mechanism foists all risk on the insured at large, whereas after the industry

is opened up to competition, the insurance companies will themselves be responsible for setting

premiums on the basis of statistical information, under the supervision of the Commissioner of

Insurance. This managed competition will be reflected foremost in the abolishment of the

standard rate and competition for customers business in the compulsory motor-vehicle insurance

market. The premium will be determined in accordance to a series of explanatory parametersthat will more accurately reflect the insurance risk of each insured.

Main Objectives of the Reform

1. To establish a competitive structure in compulsory motor-vehicle insurance in order to

enhance economic efficiency and reduce insurance premiums.

2. To encourage careful driving by using parameters that reflect insurance risk in order to set

insurance premiums and prevent subsidization, so that all insureds pay their own risk

premiums.

A. Memorandum of Understanding between the Ministry of Finance and the Insurance

Companies

In view of apprehensions expressed in the Knesset about claims by insurers and other parties

regarding the industrys readiness to implement the provisions of the law in full, the Ministry of

Finance and representatives of the insurers reached an agreement concerning phased

implementation of the Managed Competition Law. A Memorandum of Understanding between

representatives of the Commissioner of Insurance and representatives of the insurance companies

was drafted (see Appendix 4.1) and was approved under the signatures of all insurance

companies that offer compulsory motor-vehicle insurance.

The Memorandum of Understanding was based on the following principles:

1. On April 1, 2001, the first stage of the reform will begin with the repeal of Paragraph 17

of the Compensation for Traffic Accident Casualties Law, 1975, and the provisions of the

Erlich letter will lapse. As of that date, the standard rate set by the Minister of Finance will

no longer be in effect and insurers will be allowed to set rates within 10 percent of the

average rate that is determined on the basis of data in the database. Thus, as of that date,

the insurers will assume full responsibility for insurance rates and will have no mechanism to


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compensate them for loss. From September 2000 on, the companies sold at a loss in order

to reimburse the public for excess profits. Henceforth, it will also be necessary to adjust the

rate so as to reflect the average risk in the industry, as based on the recommendations of the

database operator, while ceasing to absorb past earnings.3

2. On January 1, 2003, the reform will be implemented in full and the compulsory motor-

vehicle insurance industry will be open to managed competition. Insurers will bear the full

insurance risk and premiums will be set in accordance with a series of explanatory

parameters that will reflect the insurance risk of each insured.

3. The division of responsibility between the insurance companies and Avner, to be applied as

part of a coinsurance arrangement, is set at 70 percent for insurers and 30 percent for Avner

in 2001 and 80 percent vs. 20 percent, respectively, in 2002. On January 1, 2003, the

coinsurance arrangement with Avner will come to an end and every insurer will bear the fullinsurance risk on the policies it issues. On that day, Avner will cease functioning as a

coinsurer and its only function will be to settle run-off claims on policies that were issued to

that time.

4. Avners outstanding liabilities or surplus assets will be transferred to Karnit, which will

assume said liabilities or assets as if it were Avner. This entails solvency and regulatory

mechanisms to ensure appropriate, sound management of the process of settling claims while

preserving Avners assets for the public good. These mechanisms include the appointment of

a supervisory accountant for Avner, who will supervise the companys income and

expenditures starting in January 2001, the appointment of most members of the board of

directors by the Ministry of Finance during 2001, and the appointment of a special manager

who will have the authority of an authorized manager as stipulated in the Regulation of

Insurance Transactions Law, 1981. This will take place in January 2003.

B. Amendment to the Motor-Vehicle Insurance Law

Pursuant to the Memorandum of Understanding between the Ministry of Finance and the

insurers, the Motor-Vehicle Insurance (Insurance under Conditions of Managed Competition and

Transitional Arrangements) Law (Amendment 2), 2000, was passed in December 2000. Its

purpose is to apply the understandings reached between the Ministry of Finance and theinsurers.

2 For full details about the need for reform in compulsory motor-vehicle insurance, the structure of this insurance

line, the meaning of Paragraph 17, Erlich letter, the absorption of past profits, and transactions carried out

dur ing the t ransfer per iod, see the Repor t of the Commiss ioner of the Capi ta l Marke t for 1999,


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C. April 2001 Rates

In February 2001, in the wake of the aforementioned understandings and legislation, the Minister

of Finance issued the Regulation of Insurance Transactions (Insurance Premiums that InsurerMay Charge Motor-Vehicle Insureds) Regulations, 2001 (hereinafter: the Regulations).

The Regulations amended the previous regulations in the following ways:

1. By changing the method of setting rates and transferring responsibility for this action to the

insurance companiesin the course of which the former losses-and profits-mechanism was

abolishedit became necessary to set a rate that reflects the average risk in the industry.

The change was reflected in a 4.5 percent overall increase in the rate, due to the cessation

of absorption of past profits starting on September 1, 2002, and termination of the

mechanism of compensation for past losses, should there be any.

2. The transfer of responsibility for setting rates to the insurers, as well as the principles of

reform in the industry, made it necessary to set rates that reflect, as far as possible, the risk

for each type of vehicle. Since the rates applied until April 2001 did not reflect variable risk

components deriving from the particular vehicle insured, high-risk vehicles were subsidized by

lower-risk vehicles. The rates set forth in the regulations reflect a gradual changeover to

rational rates that reflect the risk. This was in accordance with the recommendations of the

database operator, which were based, among other things, on the report by the actuaries

Coutts and Gath. For example, a standard rate was set for private vehicles, irrespective of

engine displacement (a factor that had previously been taken into account), and the rates for

commercial vehicles, buses, and taxis were adjusted as warranted.

The rates for motorcycles take into account crossover agreements that took effect on April 1,

2001, between motor cycles and all other vehicles. These agreements reflect the appreciable

differences between motorcycles and all other vehicles in terms of damage caused.

The main changes in the r isk rates , as shown in Table 4 .2 , were the fol lowing:

standardization of rate for all private vehicles regardless of engine displacement, raising the

effective rate for motorcycles by 37 percent, and reducing the rate for private buses (up to

twenty passengers) and minibuses by 49 percent.

3. The maximum rate of management fees, including agents commission, profit, and so forth

that an insurer may charge was raised from 12.94 percent to 13.5 percent (since the Karnit

component was removed from the insurance premium, the increase is 14.23 percent).

3 For details, see the 1999 Report.


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4. The standard rate was abolished; each insurance company may set rates within a 10 percent

range below or above the average benchmark rate stipulated in the Regulations.

Finally, the Regulations enshrined the arrangement between the Commissioner of Insurance andthe insurers that had been in effect since 1993. According to the arrangement, the insurers

transfer to Avner an amount equivalent to 0.547 percent of net premiums to cover Avners

expenses.

D. Regulation of Compulsory Motor-Vehicle Insurance Rates through January 2003

As stated, the Regulations set an average risk rate for each type of vehicle, from which each

insurance company may deviate by up to 10 percent in either direction, based on parameters

that the company chooses from a closed internal list. In February 2001, the Commissioner ofInsurance issue a circular entitled Procedure for Submitting Rates for Approval in the

Compulsory Motor-Vehicle Industry, which stipulates the method of regulation of the

compulsory insurance rates from April 2001 to December 2002. Among other things, the circular

rules that insurers may use the following variables in setting premiums: engine displacement,

drivers age, number of years the driver has been licensed, use of vehicle, number of previous

accidents, number of license revocations, and airbags in vehicle.

The circular instructs insurance companies to submit the rates they wish to charge to the

Commissioner for approval. Companies may choose parameters from the list and determine their

weight on the basis of actuarial rationale, provided that the final rate for each insurer remains

within a 10 percent range of the rate set in the Regulations and that one risk rate is set for all

insureds who have the same characteristics.


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Table 4-2

Compulsory Motoer-Vehicle Insurance Risk Rates, April 2001

(NIS)

Private car Up to and incl. 1,050 cc 84,566 1,302 1,528 226 17

Up to and incl. 1,550 cc 446,993 1,414 1,528 114 8

Up to and incl. 2,050 cc 616,125 1,484 1,528 44 3Over 2,050 cc 60,405 1,770 1,528 -242 -14

Motor-cycles Up to and incl. 50 cc 33,401 923 1,264 340 37

Up to and incl. 250 cc 24,993 1,749 2,394 645 37

Up to and incl. 500 cc 6,497 1,952 2,673 720 37

Over 500 cc 6,204 1,952 2,673 720 37

Buses Private up to and incl. 9,135 4,356 2,242 -2,114 -49

20 passengers

Private, over 20 passengers 649 4,414 4,482 68 2

Taxis Up to 6 seats 8,703 4,254 4,159 -95 -2Over 6 seats 2,389 6,380 7,273 893 14

Commercial Up to and incl. 1.6 tonnes 80,467 1,738 1,906 170 10

vehicles Up to and incl. 4.0 tonnes 156,793 1,834 1,906 72 4

Over 4.0 tonnes 31,715 3,515 3,859 344 10

Trains Ports and Railroads 4,830,557 4,139,254 -691,303 -14

Authoritypassengers

Ports and Railroads 1,216,260 3,255,574 2,039,314 168

Authorityfreight

Type of

vehicle

Subgroupv Previous

rate

(incl.

asborption)

of past

profits

New rate

(without

absorption

of

past profits

Change

(pct.)

Change

(NIS)

no. of

vehicles


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E. Crossover Order

When the Compensation for Traffic Accident Casualties Law, 1975, was first applied, and in

view of the no-fault principle, the Minister of Finance implemented arrangements to divide theburden of compensation among insurers in the event of an accident involving multiple vehicles

with different degrees of damage. The principle of the arrangement was that in a road accident

involving a heavy vehicle and a light vehicle, the insurer of the heavy vehicle would

furnish half the compensation for which the insurer of the light vehicle is liable.

The Compensation for Victims of Road Accidents (Arrangements to Divide the Burden of

Compensation among Insurers) Order, 2001 (hereinafter: the Crossover Order) broadened these

arrangements. The Crossover Order, issued at the start of 2001, was largely based on the order

previously in effect, with the addition of an arrangement for dividing the burden of

compensation is the event of an accident involving a motorcycle and another vehicle.

The cost of compensation to motorcyclists is NIS 380 million, as against an expected NIS 130

million in motorcycle insurance premiums. In the estimation of the database operator (as

expressed in his recommendation for April 2001 rates), the implementation of the Crossover

agreement for motorcycles will reduce the liability of motorcycles for compensation for road-

accident injuries by some NIS 116 million, so that after the crossover arrangements are

implemented, the expected cost on account of compulsory insurance for motorcycles is projected

at NIS 270 million.


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4 See the 1999 Report.

5 The health insurance reported for the illness and hospitalization industry does not include long-term care

insurance.

6 Claims during the period divided by premiums received during the period.

3. Health Insurance

A. Introduction

The growth trend in the private health-insurance market, which began after the State Health

Insurance Law was passed at the beginning of 1995,4 has led to the development of a variety of

new insurance products. This process is reflected in the industrys business results, which point

to continued growth in total premiums from illness and hospitalization insurance.

In view of the diversification of products, coupled with greater public awareness of health

insurance, we describe consumer guides devised by the Commissioner of Insurance that aim to

help insureds make enlightened decisions when they purchase health insurance policies.

B. Illness and Hospitalization Insurance Business Results

1. The Industry in 2000: Main Indicators

Activity in illness and hospitalization insurance in 2000, as reflected in the level of premiums,

indicates that the growth observed in recent years (as reviewed in the 1999 Report) is

continuing. Along with the diversification of products marketed in the industry, as reviewed in

this chapter, gross premiums increased by 7.4 percent over premiums 19995 and came to about

NIS 1 billion. Notably, growth was slower than in 1999, when premiums expanded by 18percent. The figures also show that the scope of illness and hospitalization premiums is much

greater than the growth rate in all elementary insurance lines0.5 percent, but lower than the

growth rate in life insurance9.5 percent.

Notably, illness and hospitalization insurance does not cover all activities in the field of health

insurance; some activities, such as long-term care insurance, are reported under life insurance.

Ex pe nd it ure ra ti o: The expenditure ratiothe ratio of total gross expenditure (agents

commissions, administration, and general) to total gross premiumswas 33 percent in 2000,

similar to the figure for the previous year.

Loss ratio: The loss ratio is the ratio of gross claims (paid claims and change in pending

claims) to total gross premiums. According to the results, the loss ratio fell by more than 2

percentage points, from 65.8 percent in 1999 to 63.6 percent in 2000. This made the industry

more profitable.


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Figure 4.9 shows the main components of the financial results in this type of insurance.2.2.

2. Market Shares in Illness and Hospitalization Insurance

As the industry has grown in recent years, more and more companies have been active in it

and their market shares have changed.7 Between 1997 and 2000, the cumulative growth rate was

44 percent over three years (annual growth of almost 13 percent) and much of the growth was

attained by companies new to the industry. Figure 4.10 shows the insurance groups market

shares in 2000.

7 Insurance companies in the industry in each group:

q Harel Group: Shiloah, Sahar-Zion, Dikla

q Phoenix Group: Phoenix, Hadar

q Migdal Group: Migdal, Hamagen

q Clal Group: Clal, Aryeh, Ilit


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8 Such as surgery, transplants, hospitalization, and long-term care. For a more comprehensive review, see the 1999

Report.

Figure 4.10 shows a concentrated industry, in which about half the premiums derive from one

group, Harel, and the three large groups have an 81 percent market share. Notably,

concentration in the industry has been falling in recent years. For example, the market share of

the three largest insurance groups in the industry was 95 percent in 1997 and that of the Harel

Group exceeded 60 percent. In fact, new companies in the industry and small companies

enjoyed greater growth than that of the industry as a whole. The downtrend in concentration

may be to the consumers advantage in several ways, mainly greater variety of insurance plans.

C. New Health-Insurance Plans

One of the characteristics of the growth in the health-insurance market is the diversification of

types of policies available to consumers, as the market strives to provide insurance solutions for

existing and new needs of the population and to adjust types of coverage to consumers specific

needsin contrast to the past, when plans were more rigid in terms of coverage8.

This chapter reviews some of the new policies that have been added over the past two years to

the health market insurance as independent policies or riders, e.g., health insurance for Israelis

abroad, childrens insurance, and medication insurance.


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1. Insurance for Children

In the past two years, there has been a clear trend of development in all aspects of insurance

plans for children. Most insurance companies offer such policies today, either as standard onesstanding or as riders, and provide a variety of types of coverage. The coverage compensates or

indemnifies for health-insurance events such as developmental problems in childhood and

problems characteristic of adolescence, hospitalization or a prolonged stay at home, disability

caused by accident or the discovery of a serious illness, and psychotherapy following a death in

the family.

The policies cover diverse risks that are typical of certain age groups, as opposed to a particular

type of risk. Some plans allow insureds to transfer, without underwriting,9 to a health plan that

the company offers at the time after they have completed military service or reached the age of

18.

2. Insurance for Israelis Abroad

Local and global economic growth in the past decade has led to an increase in the number of

Israelis, such as employees of high-tech companies, government representatives, businesspeople,

and students, who spend extended periods abroadfrom several weeks a year to several years.

Overseas health-insurance plans that provide a wider range of health service than that offered by

overseas travel insurance (which mainly provides emergency medical coverage only) or standard

personal insurance, and include coverage such as medical hospitalization and surgery, purchase

of medication, ob-gyn care, psychological care, and more, have recently been marketed to this

target population.

These plans are meant as alternatives both to the basic medical coverage that many Western

countries provide for their citizens only and to private health-insurance plans in those countries.

The plans are intended chiefly for Israelis who live abroad on a permanent basis, and they offer

limited continuity of coverage when the insureds return to Israel. These plans cost much more

than private health-insurance plans in Israel, mainly because they do not rely on public health

insurance that states provide for their citizens.

9 Generally speaking, an insured who wishes to join a health-insurance plan must be underwritten, an act that

requires the submission of a health statement. {}


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10 Central Bureau of Statistics, Statistical Abstract of Israel 2000, Table 24.1.

3. Medication Insurance

Total household expenditure on medication in Israel is NIS 1.7 million per annum, 5.5 percent

of national health expenditure.

10

The State Health Insurance Law includes a list of medicines thatare covered by the basic health package. Since these medicines are stipulated, those not

included, which therefore must be purchased privately without any state participation, are also

defined. The insurance plans are intended to cover the purchase of medicines that are not

provided by the health funds as part of the basic package or supplemental health services.

Medication insurance is now offered by most insurance companies, usually as a rider in medical

expense insurance plans or as an integral part of an insurance plan.

D. Dental Insurance

1. Background

Dental insurance covers the cost of dental care and is not included in national health insurance.

Most dental insurance policies are sold in group form or as freely standing policies. The

insurance period in these policies is usually three to five years; sometimes it is longer. The

insured commits to a predetermined insurance period and undertakes to pay the premium for all

of that time. Notably, insurance companies conclude agreements with dentists and dental clinics

in regard to most policies.

2. Examination of Criteria for the Regulation of Dental Insurance

A Health Ministry committee that examined criteria for the regulation of dental insuranceon

which a representative of the Commissioner of Insurance was a memberpresented its

recommendations in December 2000. The committee looked into problems in the dental-insurance

market and examined the performance of the policies.

The crux of the committees recommendations pertain to issues such as prevention of excessive

intervention by insurers in the medical care process, exploring the possibility of allowing

insureds to choose their service provider, and appropriate disclosure of details of the insurance

transaction, including group policies.

E. Purchase of Private Health Insurance

Health-insurance plans cover impairment to the insureds health by paying for medical care in

addition to that assured by national health insurance, when necessary. Israel has a multilayered

system of health-care coveragethe State Health Insurance Law,11 supplemental health services


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that are offered by health funds (roughly akin to HMOs), and private health insurance.

Additionally, private insurance plans are differentiated and are typically quite complex because

they are complicated financial products that cover health risks. Usually, too, they entail greater

understanding than the average consumer has.

Thus, consumers who wish to buy private health insurance need assistance. The first part of this

survey provides background information about Israels health-insurance arrangements with

emphasis on private coverage, and the second part stresses four phases of action that prospective

purchasers of private health insurance should carry out before they go ahead with the purchase.

The appendix to this chapter explains the phases in detail, including reference to specific types

of coverage. Importantly, this breakdown is not meant to be a substitute for professional advice;

its only purpose is to equip consumers with an additional tool that may help them.

Below is an abstract of the topics covered in detail in Appendix 2.2:

1. Structure of Health Insurance in Israel

Health insurance in Israel is made up of several layers that are differentiated by types of service

and insurance providers (see details in the Annual Report of the Commissioner of the Capital

Market for 1998):

National health insurance is the basic layera basket of services provided by the health

funds under the State Health Insurance Law. According to the provisions of the law, the health

services in the basket are to be delivered on the basis of medical discretion, at a reasonablelevel of quality, within a reasonable period of time, and at a reasonable distance from the

insureds place of residence.

Health funds expand the basic package of services and offer additional layers of service, such

as transplants at high cost and choice of surgeon. The funds supplemental health-service plans

include various forms of coverage that are limited in extent and in insurance amounts, and most

services pertain to elective types of care and are implemented by service providers that have

agreements with the funds. The funds are required to offer the supplemental plan to any

member who wants it, irrespective of his/her state of health or economic situation.

Insurance companies expand the basic package of services, offer additional layers, and provide

a level of service that the basic package omitsexclusively private health services, such as

long-term care. The companies activity in this regard is regulated by the Regulation of

11 Which sets forth the basic health-care services to which all Israel citizens are entitled.


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Insurance Transactions Law, 1981, which stresses their obligation to meet future commitments to

insureds, and by the Insurance Contract Law, which regulates relations between insurers and

insureds.

2. Points of Emphasis in the Process of Buying Health Insurance

Below are suggested stages in the process of buying health insurance:

a. Defining needs: The first step in buying private health insurance is to define the needs that

the insurance is supposed to meetin respect to coverage of general medical services, such

as private surgery or transplant, and to coverage of specific needs, such as medications or

alternative medicine.

b. Comparison of types of coverage: After the needs are defined, the consumer should

examine several different programs and compare them in view of the needs defined. It is

also important to check out the restrictions in the policy.

c. Examination of costs: Since most individual health-insurance policies are long-term, their

premiums are also spread over a lengthy periodoften for all of ones life. The consumer

should examine the cost of the policy, including the deductible, limits of insurers liability,

etc., in consideration of his/her sources of household income.

d. Comparison and purchase of the insurance, on the basis of the table in the Appendix.

As stated, the Appendix describes the stages in full and discusses specific forms of coverage.

F. Group Health Insurance

Group insurance designed for a group of individuals who have specific features in common. One

reason to conclude a collective insurance contract for a groups is to cut costs, e.g., by reducing

the cost of collecting premiums and dealing with claims. In this form of insurance, the

policyholder draws up the contract with the insurer and negotiates the terms of insurance for all

insureds. The policyholder in a group insurance arrangement plays several roles: providing

enrollment forms, collecting premiums, keeping the list of insureds up-to-date, etc. The en bloc

joining of group members also affects the medical underwriting process, which is usually

different from the underwriting process in individual insurance, as we explained below.

Notably, 60 percent of group insurance arrangements are made by employers who conclude them

in order to insure their employees. The group health insurance field has been developing in

recent years. Below is a survey of types of coverage in group health insurance, based on

insurance companies reports to the Commissioner of Insurance about group health-insurance

policies that were issued up to the end of 1999. Notably, the data provide only a partial picture

of the group insurance business because a new reporting format was used.


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Underwriting

When people join a group insurance plan, the extent of medical underwriting is usually held to

a minimumif it takes place at allsince the members of the group join en bloc and are notexamined by the insurance company. Restrictions that absolve the insurer of responsibility for

pre-existing medical conditions exist in 40 percent of group policies. The others carry no such

restriction and individualized underwriting in group policies is very rare.

Insurance Term and Insurability

The insurance term in group insurance is stipulated in the agreement between the policyholder

and the insurance company and is time-limited. This distinguishes between group policies and

individual policies, in which the insurance term usually lasts for the lifetime of the insured, the

insured does not have to meet any conditions for renewal, and the insurer cannot cancel the

policy unless the insured fails to pay premiums, where the law permits this. The insurance term

in group health-insurance policies (i.e., the initial period of the agreement) ranges from two

years to ten years, with three to five years as the most typical range. About half of policies

allow the insured to buy individual insurance from the insurance company without new

underwriting in the event that he/she leaves the group, and in a few cases the insured may

acquire individual insurance if the group does not renew the insurance or moves to a different

insurer.

Qualification Period

Health insurers use an underwriting tool in addition to the stipulation concerning pre-existing

medical conditions: the qualification period, during which the insured pays premiums in regular

fashion but is ineligible for coverage. Any medical condition discovered during the qualification

period is considered pre-existing and insurance benefits are not paid on its account. The

qualification period is usually three months from the beginning of coverage, in both individual

and group policies.

Extemt pf Cpverage

About 600 group health-insurance agreements are in effect in Israel. More than half of them

include coverage for surgery in Israel and abroad and transplants and special treatment abroad,and more than one-third cover long-term care. Major medical coverage and accidental death and

disability are covered in 10 percent of the agreements and dental care is covered in 35 percent

of policies.

Analysis of the group arrangements in terms of numbers of persons insured shows that 25

percent of members of group health-insurance plans are covered for surgery in Israel and abroad

and for transplants and special treatments abroad. Most insureds are covered for long-term care.


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In sum, the reports received indicate that, evidently, most group health-insurance policies are

drawn up for groups of workers and cover surgery, transplants, and long-term care. The

continuity of coverage, an important condition in health insurance, is limited in group policies to

a period stipulated in the agreement between the policyholder and the insurance company. These

plans provide no solution for cases in which the insurance runs out and the policyholder does

not renew it with another insurer. The Commissioner of Insurance is looking into this problem

at present t ime in order to devise an appropriate structural way to meet the needs of

participants in group health-insurance arrangements.


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APPENDICES

GENERAL INSURANCE


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Appendix 4.1

Memorandum of Understanding, November 13, 2000

Arrangement in Effect from January 1, 2003:

1. The insurers shall carry the full insurance risk in the industry, without coinsurance with

Avner.

2. Differential rates shall be employed in accordance with rules that will be phrased after

consultation with the insurance companies in professional panels that will be run by the

information database operator under the rules of antitrust. The database manager shall publish

benchmark rates for pure risk that are based on the results of the industry at large, including

those of the pool, with detailed presentation of all components of the rate and the

professional methodology used in determining it. The benchmark rates shall be determined onthe basis of accepted actuarial principles. The supervisory regulations for the differential rates

will go into effect on January 1, 2003.

3. The database regulations, including the date on which the database operator will begin to

receive payments, will go into effect at once (on January 1, 2001) and the date on which

the insurance companies must begin forwarding data to the database shall be deferred to no

later than July 1, 2001. The cost of the database shall be included in the insurers loading

limit. The maximum permissible load shall be raised from 16 percent to 16.55 percent per

year in 2003 and shall be recalculated in accordance with actual costs in 2004 and

subsequent years (on the basis of an estimate of 16.25 percent).

4. The database operators financial statements shall be forwarded to the insurers. Any decision

about exercising option periods or inviting new applications for the post of database operator,

as the case may be, shall be made only after consultation with the insurers. Insofar as a

decision to invite new applications is made, the insurers shall be given an opportunity to

express their views about improvements relative to the previous invitation.

5. A professional team under the Commissioner of Insurance, in conjunction with representatives

of the insurers and the database, shall be established at once. Its purpose is recommend to

the Commissioner of Insurance a method of updating the pool rate in accordance with theresults of the industry and the pool. The goals of such an adjustment, among other things,

are to keep the losses or the size of the pool from growing and to cope with unforeseen

deviations in estimating the results of the pool. In this activity, the material function of the

pool in making insurance available to the public is to be preserved. For this purpose, the

team shall consider the use and integration of various complementary arrangements, including

updating the pool rate, improving the correspondence between the rate and risk in the

voluntary market, and introducing efficiencies in the rate structure. If the team does not

complete its work by January 1, 2001, the regulations shall be enacted without an adjustment

method, which shall be enacted at some subsequent time.


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Avner

6. During the extra transition period, Avner will function as a coinsurer and will be entitled to

provide all services that it delivers today. Concurrently, the insurers will prepare for thedeactivation of Avner on January 1, 2003, in all fields at issue.

7. From January 1, 2003, Avner shall no longer engage in any activity that is not related to

management of the R/O portfolio. Claims during the R/O period shall be handled in

accordance with existing agreements between Avner and the companies.

8. Avners method of R/O management, under state regulation, shall be enshrined in law. It

shall be stipulated that Avner will manage the R/O process for the purpose of attaining the

goals of the law and that the companys assets should suffice to cover its liabilities.

9. Avner shall be absolved of the capital requirements set forth in directives of theCommissioner of Insurance and the insurers shall be absolved of the need to make up

shortfalls in Avners insurance reserves, if any. Concurrently, the insurers (the shareholders in

Avner) shall waive all entitlement to Avners assets and any residual surpluses or rights in

receivership. In the event of a surplus or shortfall as stated, the balance, as the case may be,

shall be dealt with by Karnit. The provisions of Paragraph 5 of the Controlled Competition

Law, concerning division of responsibility between the insurers and Avner in coinsurance,

shall also be applied to payments during the R/O period, insofar as this is necessary. Since

the shareholders in Avner will have waived their assets in Avner, as stated, Avner will have

neither claims nor entitlements of any kind vis-a-vis its shareholders in regard to their being

members of Avner.

10. To implement the provisions of this memorandum:

a. From April 1, 2001, the Avner Board of Directors will be downsized and shall include

only ten directors, six of whom, including the Chair, shall be appointed or replaced by

the Commissioner of Insurance per approval of the Minister of Finance (hereinafter:

public directors). The Commissioner shall employ directors with appropriate credentials

and background. The directors will assure sound ongoing management and sound

transition of the company to R/O.

b. From January 1, 2001, Avner shall employ (at its expense) a supervisory accountant

representing the state. Said accountant shall be empowered to supervise the corporations

income and expenditure system and, for this purpose, shall be entitled to receive any

relevant information or document; to demand that the Board of Directors discuss such

topics that he/she feels appropriate; and to take part in the discussions of the Board of

Directors and its committees as an observer. The corporation shall make any financial

undertaking larger than NIS 40,000 that is not a payment to settle a claim under the

coinsurance agreement, without the accountants approval.


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c. From April 1, 2001, any agreement, arrangement, or undertaking, or any change therein,

that has a material effect on the business results of Avner shall be brought to the

Board of Directors for its prior approval. Approval of said material affairs, including the

realization of assets, stipulation of terms of employment or resignation of workers, or

changes in their terms of employment, shall require a special majority of 60 percent of

members of the board, including at least four public directors. Amendment of the

company statutes or of agreements in the sense of the Controlled Competition Law shall

also require the approval of the Commissioner of Insurance. In any event, no dividend

shall be distributed in any matter whatsoever. Without derogating from the provisions of

this Subparagraph, from the day on which the insurers endorse this Memorandum of

Understanding to the time the public directors mentioned in Subparagraph (a) are

appointed, any matter of this nature shall be brought to the Commissioner of Insurance

for prior approval.

d. From January 1, 2003, a special manager acting under the auspices of the Commissioner

of Insurance shall be appointed for the company, and said manager shall be authorized

to act in a manner similar to an authorized manager under the Regulation Law.

11. Avner shall not be involved in running the database that was set forth in the law.

Transition Period

12. During the period between January 1 and December 31, 2001 (underwriting year), the

insurers shall assume 70 percent of the insurance risk in compulsory motor-vehicle activity

and Avner shall assume 30 percent.

13. During the period between January 1 and December 31, 2002 (underwriting year), the

insurers shall assume 80 percent of the insurance risk in compulsory motor-vehicle activity

and Avner shall assume 20 percent.

14. On April 1, 2001, the Erlich Letter and Paragraph 17, in respect to the insurers share in

the coinsurance, shall become invalid. Insurers will be entitled to set rates within a band of

10 percent above and 10 percent below the average rate to be stipulated, as stated, in

Paragraph 15. On that day, the insurers maximum permissible load shall be raised from

12.94 percent to 13.5 percent.

15. On the data the Erlich Letter becomes invalid, as stated, the rate shall be adjusted by 0.5

percent relative to the rate preceding September 1, 2000. From then on, adjustments will

be made in accordance with recommendations of the database operator, with neither a

component of absorption of past profits nor one that adds past losses. Concurrently, the

rate correction effective as of September 1, 2000, in respect to some insurers, shall be

repealed. Until the end of the transition period, the rate shall be adjusted in a manner that

will reflect the average risk in the industry, in accordance with the database operators

recommendations, within a structure similar to that the existing rate.


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Further Actions

16. The Commissioner of Insurance shall take action, in conjunction with the insurers, for

progress in the following matters:

a. obtaining access to main relevant databases, such as the database of traffic offenses and

the database of drivers licenses, to facilitate the underwriting process;

b. contending with insurance fraud, including by means of the database operator; for this

purpose, the database operators power to obtain relevant personal information shall be

broadened;

c. efficient reckoning with and auditing of service providers, including implementation by

hiring outside auditors who will act in the service of insurers who wish this to be done;

d. The foregoing will comply with the provisions of any law and will take place after

coordination with the relevant players.

17. Avner shall forward all historical information in its position to the database operator.

General Remarks

18. A joint team, including representatives of the insurers and of the Commissioner of

Insurance, shall be established to monitor the implementation of the reform. Matters of

interest and recommendations shall be presented to the Commissioner of Insurance.

19. After all relevant players signal their approval, the agreements shall be enshrined in legal

arrangements, each in the manner best suited to it. The insurers, as shareholders in Avner,

undertake to act toward the implementation by Avner of the provisions of this

Memorandum. The binding version of the Memorandum is the Hebrew one.


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Appendix 4.2

Aids to the Consumer in Buying Health Insurance

Background

1. Health Insurance in Israel

Health insurance in Israel is composed of several layers, divided on the basis of service

providers and insurers (as surveyed in the Report of the Commissioner of the Capital Market

for 1998).

National health insurance furnishes the basic layer of health insurance, a basket of services

delivered by health funds under the State Health Insurance Law.

Health funds broaden the basic package of services and offer additional layers of service, suchas transplants at high cost and choice of surgeon.

Insurance companies expand the basic package of services, offer additional layers, and provide

a level of service that the basic package omitsexclusively private health services such as long-

term care.

The basic layerthe health services included in the basket is delivered by health funds in

accordance with the State Health Insurance Law on the basis of medical discretion, at a

reasonable level of quality, within a reasonable period of time, and at a reasonable distance

from the insureds place of residence.

Any citizen who wishes to obtain extra services, such as personal choice of surgeon, greater

availability and convenience of service, and full coverage of expenses for treatments in Israel

and abroad, has to purchase them separately by buying supplemental insurancea layer on top

of the basket that health funds and insurance companies offer at an extra charge.

Supplemental health services by health fundsthe funds supplemental programs include a

variety of coverages that are limited in extent and in benefit levels. Most services of these kinds

pertain to elective types of care and are implemented by service providers that have agreements

with the funds. The funds must offer the supplemental plan to any member who wants it,

irrespective of his/her state of health or economic situation.

Private insurance by means of insurance companies this activity is regulated by the

Regulation of Insurance Transactions Law, 1981, which stresses the insurers obligation to meet

future commitments to insureds, and by the Insurance Contract Law, which regulates relations

between insurers and insureds. A characteristic feature of private health insurance is the need for

underwriting, in which the insurance company examines risky characteristics of the potential

12 The binding version of the Memorandum is the Hebrew one.


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insured, e.g., by demanding a health statement. As a result of the underwriting process, the

policy may become more expensive for a specific insured; it may also include restrictions of

coverage. Importantly, when the affidavit is filled out, the applicant must apply appropriate

disclosure. Failure to do so may result in severely impaired insurance coverage when it is most

needed.

Notably, insurance companies private health-insurance plans in Israel usually provide second

and/or third layers of coverage, i.e., are supplemental to the national health insurance that all

citizens hold and to the health funds own extra services.

Additional Characteristics of Insurance Companies Private Health Plans

The wide variety of products makes comparison and choice difficult.

Medical and professional underwriting is applied when people join the plan.

Private policies are long-term insurance arrangements that entail a wise decision by the insured

when he/she signs the contract.

Policies are usually sold in the form of packages of various types of coverage that are not

always fully adjusted to the customers needs.

Policies include different kinds of insurance benefits (compensation or indemnification); the

differences have implications for the nature of benefits and the possibility of setting one off

against the other.

Types of Private Health-Insurance Products

Private health insurance covers various kinds of insurance events, chiefly:

q private surgery in Israel and/or abroadchoice of surgeon, expenses for surgery, pre-operative

consultation, hospitalization expenses, etc.;

q transplants and special treatments abroad;

q long-term care;

q

major medical;q loss of working capacity.

(For explanation of these types of coverage, see Report of the Commissioner of the Capital

Market for 1999.)


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13 An individual policy is one purchased by the insured for him/herself and/or for his/her family. The process of

issuing the policy includes medical underwriting in which the insured fills out a health statement. {} A group

policy is one taken out for a group of insureds, such as members of a labor union, by a policyholder who is

not necessarily an insured.

Additional Types of Health Insurance

1. Ambulatorymedical services given without hospitalization, such as consultations with a

specialist, physiotherapy, radiotherapy, and chemotherapy.

2. Alternative medicine.

3. Miscellaneous testsperiodical check-ups, pregnancy tests, pediatric examinations, imaging,

etc.

4. Second opinionconsultation with an additional physician before surgery, including an expert

abroad.

5. Medicationexpenses for medications that are not covered by national health insurance.

6. Dental insurancecoverage that pays for dental care (which is totally excluded from nationalhealth insurance), usually sold in the form of freely standing policies and marketed on a

group basis.

This survey deals mainly with health insurance that covers medical expenses, e.g., surgery,

transplants, care abroad, and long-term care. Consumers may also find these points useful when

they shop for other kinds of insurance, such as major medical and loss of working capacity.

2. Points to Emphasize in Shopping for Insurance

The following phases are proposed:

a. Define your needs.

b. Examine the types of coverage available.

c. Examine the costs.

d. Compare the plans and buy the insurance.

Phase ADefine Your Needs

The first step in buying private health insurance is to define the needs that the insurance is

supposed to meet. Many insurance plans cover general health services such as private surgery or

transplants but do not always cover specific needs such as surgery abroad, medications, or

alternative medicine. Below are several main points that may help you define your specific

insurance needs:


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q What health insurance do you and your family already have, either through health funds or

in the private market, in individual or group policies?

q

Do you or anyone in your family have special health needs?

q Are there children in the family? Do they need special care?

q Does anyone in the family need to see a specialist regularly?

q How much insurance can you afford in the long term?

Phase BExamining Types of Coverage Available

After you define your needs, determine which plan meets them best. You should examine two

or three different plans and compare them with the real needs that you have identified. Make

sure that you understand the coverage and that it is spelled out in the policy. It is also

important to determine what events the policy covers and what restrictions apply to the

coverage.

You may find the following points useful in examining a policy:

Coverage: a list of the main types of coverage in the policy and expansions offered on top of

the basic policy.

Duration of insurance term: is the insurance term measured in terms of a number of years or

until the insured reaches a certain age? In most health policies, the insurance term is for life

and the insurer may cancel the policy only if you fail to pay the premiums.

Qualification period: the amount of time at the beginning of the insurance term, expressed in

days or monthsninety days in most casesduring which the insured is not covered for various

events.

Waiting period: the period of time, expressed in days or monthsninety days in most cases

during which the insured must wait, after an insurance event, for eligibility for benefits under

the various types of coverage.

Deductible: an itemization of deductibles for different types of coverage and, possibly, a

deductible limit.

Change of policy terms during the insurance term: the time from which the plan may be

modified, as well as the conditions for such modification.

Type of insurance proceeds: compensation, a predetermined sum for which the insured need

not present receipts, or indemnification, meaning coverage of actual outlays for a medical

procedure, against receipts. Notably, in the case of indemnification, benefits are given only up to

actual expenditure even if the insured owns two similar policies.


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Joining the plan: an underwriting procedure that the insurer stipulates, such as filling out a

health statement and waiving medical confidentiality.

Price

Level of premiums: separate and detailed presentation of the price of the basic policy and its

riders.

Structure of premiums: Is the premium constant or does it change as you grow older? In the

latter case, find out how and by how much the premium will change in each age bracket

during the insurance term.

Change in premium during the insurance term: The date from which changes may be made,

as well as the conditions for such changes. Bear in mind that this change pertains to the entire

premium scale; therefore, a change affects the cost of the policy in cumulative terms and not

only in response to change in the insureds age.

Terms of policy cancellation by insured: a breakdown of the premium refund in the event of

cancellation by the insured, and the proportion of the total premium paid that will be credited

to the insured.

Restrictions

Terms of policy cancellation by insurer: a detailed presentation of the conditions under which

the insurer is entitled to cancel the policy.

Exclusion due to pre-existing medical condition: most policies have a condition that absolves

the insurance company from liability for a pre-existing medical condition, such as illness or

initial development of an illness that existed before the insurance went into effect or was

discovered during the qualification period. The consumer should study the definition of a pre-

existing medical condition for which the policy will withhold coverage and pay attention to the

details of coverage that will be excluded for this reason. Is the pre-existing medical condition

exclusion time-limited?

Restrictions to insurers liability: refer to the clauses in the policy that pertain to restrictions

and exclusions.

Does the policy cover medications that are not included in the basic package of health services?

Is my doctor, or some other caregiver or other medical institution with which you or someone

in your household have a caregiving relationship, included in an agreement with the insurer in

such a way as to be covered by the policy?


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q Private Surgery Policy

Insurance for medical expenses on account of private surgery in Israel and abroad is a basic

component of commercial health insurance and is offered by most insurance companies thatsell health insurance. This is actually the most sought-after form of coverage; it entitles the

insured to choose his or her surgeon and jump the queue for the surgery he/she needs.

Surgery policies fall into several categories:

Coverage for all forms of surgeryrelatively broad coverage.

Coverage for all surgery to insureds who carry supplemental insurance from their

health fundscoverage that makes up the difference between total actual expenses and those

covered by additional health providers.

Coverage for all surgery, with a deductiblea relatively low premium.

Coverage for a selected list of operationscoverage for major operations.

Rider concerning coverage of surgery abroad

In a policy that covers medical expenses in the course of private surgery, several additional

matters are worth examining:

Does the policy cover all operations or a small list?

Can the surgery be performed abroad, and under what conditions?

Can the surgery be performed by a service provider that has no agreement with the insurer?

Is compensation given for surgery by a public service provider when there is no claim

against the policy?

Is the funding of coverage conditioned or dependent on entitlements of the insured under the

State Health Insurance Law?

q Policies that cover transplants and special treatments abroad:

Insurance that covers transplants and special treatments abroad attempts to respond to themost severe insurance event, one that occurs infrequently but carries exorbitant costs that can

run into hundreds of thousands of sheqalim if not more. Must such policies provide benefits

in the form of indemnification and entitle the insured to funding of medical procedures or

reimbursement of expenses. Notably, major medical policies offer the option of nonrecurrent

compensation when a transplant is performed.

Notably, too, the insurance event is deemed to have occurred upon the diagnosis of the

medical condition due to which the insured needs a transplant and/or special treatment that

cannot be offered in Israel.


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14 ADLs are six basic daily activities, among which the inability to perform several usually constitutes a long-term

care insurance event. The activities are standing up and lying down, dressing and undressing, bathing, eating and

drinking, walking, and continence.

In policies that cover expenses for transplants and/or special treatments abroad, the following

points in addition to those mentioned above should be examined:

a. Which transplants does the policy cover?

b. Is there a post-operative convalescent benefit?

c. Is payment given for medical activity that is needed to obtain an organ for transplant?

d. Is the funding of coverage conditioned or dependent on entitlements of the insured under

the State Health Insurance Law and/or a health funds supplemental health services?

q Long-term care policies

Insurance against the need for long-term care is meant to provide financial support for a

person who cannot carry out Activities of Daily Living (ADL) and needs continual carea

need most common among the elderly. These are long-term policies, in which the payout of

proceeds ranges from three years to time-unlimited.

One who considers buying long-term care insurance should look into the following additional

points:

a. Types of coverage

Does the policy pay benefits for life?

How is the insurance event defined?

How many ADLs does it take to define the insurance event? In most cases, the

qualifying situation is the inability to perform three or four ADLs.

Are mental frailty and Alzheimers included in the definition of the insurance event?

What is the level of the monthly benefit?

Can the monthly benefit be enlarged?

Is the insured excused from paying premiums while receiving monthly benefits?

How long can benefits be paid? Possible periods are three years, five years, and

unlimited. The duration has an effect on the level of premium.


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Does the level of insurance benefits depend on the insureds age?

Are the insurance benefits given in the form of indemnification (against actual

expenses) or of compensation?

Does the policy cover nursing care in the insureds home?

Are the premiums for at-home care different from those upon admission to a nursing

institution

Are receipts required in the case of at-home care?

b. Prices

Is the insurer allowed to change the premium for insureds at large (in contrast to a

declared change in premium that is adjusted to the age of each insured), and underwhat conditions?

Detailed presentation of the premium scale up to age 95. The consumer should

consider whether the monthly premium at old age (such as 80+) is consistent with the

financial capabilities that he or she will have at that age.

Is it possible to buy a policy in which the premium does not change as the insured

ages?

Does the policy have a nonforfeiture benefit, i.e., an entitlement to partial benefits even

if the insurance is terminated?

What rights does the insured have in the event of an increase in premiums? According

to some policies, if the premium scale is raised the insured may pay the old price for

reduced benefits and/or become eligible for a nonforfeiture benefit.

Phase CExamine the Costs

Once you have defined your needs, examine the costs of the coverage that you want. Most

individual policies in health insurance are long-term plans, and their premiums are also spread

over a lengthy periodoften an entire lifetime. It is recommended to examine the cost of thepolicy in consideration of your familys sources of income. Below are several basic points to

consider in examining the total cost of health insurance:

Deductiblethe level of the deductible is an indicator of your ability to affect the price of the

plan, on the one hand, and the total cost of the insurance and the medical services, on the

other hand. The deductible may be reflected several distinct ways: the total sum up to which

the insurer does not participate in the cost of medical care, a percentage of the cost of care (as

in the case of surgery), and a lump sum that is deducted from the price of the service or

product (as in the case of medicines).


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15 Every insurance agent requires a license from the Commissioner of Insurance.

Discounts it is sometimes possible to get a discount on a policy or a policy that offers

similar coverage at a lower price. For example, there is a policy for Jerusalem residents that

refers patients to Jerusalem hospitals only. Consult an agent or an insurer to find out about

such benefits.

Another point to examine is the limitation of the insurers liability or the maximum amount of

coverage. Many policies limit the insurers liability for various medical treatments, either in

financial terms or in terms of a given number of treatments. The consumer has to determine in

which form of coverage the proposed limit will suffice for comprehensive medical care in most

cases, and in what cases the limit will place substantive limits on the availability of the medical

treatment that is sought.

In many cases, various expansions and riders are offered in addition to the basic policy. Here

the consumer should ask whether these expansions meet his/her insurance needs and shouldexamine their effect on the cost-benefit relationship of the plan. In any case, the consumer

should find out which components of the policy are voluntary and which belong to the basic

package.

Phase DCompare the Plans and Buy the Insurance

To use the information and compare the plans, consult the table in Appendix 4.3.

Buying insurance

Before you buy an insurance policy, it is best to gather relevant information from several

sources. You may contact an insurance agent who sells products of one company or several

companies and ask him/her to review the plan, give advice, answer questions, and help out in

the event of a claim. Another source of information is the insurance company. A third

possibility is by contacting friends and acquaintances who have private health insurance; they

may give you an impression of the terms of the plan, prices, restrictions, and quality of service

that they have received from their insurance agent or company.

The wide variety of policies available and the many differences among them make it necessary

to examine and compare the plans in which you are interested. Do not compare rates only.

Correct shopping should be based on additional indicators, especially in health insurance, since

policies in this field may vary widely from one company to the next. It is best to compare

types of coverage, exclusions and restrictions, waiting and qualification periods, correspondence

in matters of service, extra benefits, and price, to make sure that the total package is tailored to

your needs and to your financial resources.


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A few final tips

Use a licensed agent only.

You may examine agents licenses by visiting the Web site of the Commissioner of Insurance,

http://www.mof.gov.il/hon/bituach.htm, clicking to Insurance Agents and Agencies (available in

Hebrew only).

Before you buy a policy, you are entitled to view it and to examine its details. Do not rush to

buy a policy that you do not understand from all angles. It is better to ask for information,

view the policy, and receive explanations to any extent required.

Before making the purchase, make sure that you understand the process of filing a claimthe

forms you will need to fill out and/or submit, the address, and cases in which the insurers

prior approval is needed.

In addition to the basic policy, you may usually expand the coverage by paying an extra

premium. It is recommended that you ask how necessary these expansions are, in a manner

similar to your examination of the basic plan.


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Name of insurance plan

Name of company and address

for inquiries

Name of agent and address

for inquiries

Is coverage conditioned or dependent

on entitlements of the insured under

the State Health Insurance Law and/or

a health funds supplemental

health services?

Are all types of surgery covered or only

those on a list?

What operations / illnesses does the

plan include?

Can surgery be performed abroad?

Which transplants does the plan include?

Does the policy include ambulatory

services?

Does the policy cover are medications

that are not on the basic list?

Does your doctor have an agreement

with the plan?

What procedure is used to contact a

specialist?

Are your specific medical needs covered?What medical conditions are not covered?

How is a pre-existing medical condition

excluded?

What premium is charged for the basic

plan?

What premium is charged for Rider A?

What premium is charged for Rider B?

Rates of deductible, by types of coverage

Limits of insurers liability

Appendix 4.3

Shopping for Health Insurance: Comparison of Plans

Plan A Plan B Basic package /

supplemental

health service


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How many Activities of Daily Living are

used to define the insurance event?

Are mental frailty and Alzheimers included

in the definition of an insurance event?Level of monthly benefit

For how long are benefits paid?

Correspondence between insurance

benefits and insureds age

Is the benefit given in the form of

indem-nification or of compensation?

Is at-home nursing care covered?

Does the policy have a nonforfeiture benefit?

Detailed presentation of premium scale

in all age brackets

Appendix 4.4

Shopping for Long-Term (Nursing) Care Insurance:

Comparison of Plans

Plan A Plan B

Documents

Choosing Insurance- English