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QUESTIONNAIRE ON FINANCIAL EDUCATION AND INSURANCE

PART I:

1) Some countries faced recently events which demonstrated the need for improving financial education.

These events included financial scandals that affected pension beneficiaries, insurance policyholders or

other individual investors/savers who invested in financial instruments definitely more risky than they had

thought, raising both a problem of financial education and financial information.

Did investors recently suffer from insufficient financial education or information when investing in specific

pension or insurance products?

1. A distinction must be made between the information available and financial education. In the

past few years, there has been a vast increase in the amount of information available to the

public from insurance and pension companies and from the Ministry of Finance, Capital

Markets, Insurance and Savings (in the rest of the questionnaire Commissioner) department.

This has been accomplished primarily with the increased importance and penetration of the

internet into the marketplace and periodic bullitens which are sent to the media (mainly

newspapers) which will be further explained below. With respect to raising the level of

awareness and the interest of the public a number of actions have been taken by the government

or event have transpired which have brought to the attention of the public the importance of

financial planning.

2. In the past 3 years there have been 2 major developments in the insurance/pension market

which have gotten extensive media coverage:

a. The reform of the new pension funds (2003) and life insurance market(2004) -more

transparency of the insurance components .

b. Change in the capital market in the main:

i. The separation of the provident funds and mutual funds from the major banks

(2005) which controlled the vast majority of these funds. The banking

industry in Israel is dominated by 2 large banks. The banks were also forced to

sell their holding of insurance companies to less than 10%.ii. A special government commission which enacted laws increases the

responsibility of insurance agents and pension/insurance advisors. The

required the advisors to present the proposed insured the "best" insurance

coverage.

3. Problematic question inspite of what is written above, without increase awareness of the

public such that the public will demand the best insurance/pension coverage for there needs

and review what they have acquired regulation alone will not help.

Could the delegates elaborate on these or any other events that raised the issue of financial education?

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2) The insurance sector has always been characterized by an asymmetry of information between insurers

and policyholders. Recently, deregulation and increased competition in the sector have resulted in both a

greater number of and increasingly complex insurance products.

What is being done in your country to help consumers understand insurance policies (terminology,

contract provisions, etc.) and the functioning of insurance markets? How easy is it for consumers

to be able to compare different insurance policies?

Internet Site of the Commissioner has Buyers Guide for Life insurance and Long Term Care, and there is a

proposed Buyer Guide for Pension Savings. Each of the guides have explanations of the need for the

insurance coverages, what types of insurance coverage ia available, the rights of the insured (i.e. ability to

cancel the policy within 30 days and only having to pay the risk premium, to expect to get a detailed

explanation of what the policy covers, expected cash values policy cost illustrations, what the exclusion

are in the policy) and questions that the proposed insured should ask the insurance agent/company .

By regulation, with the insurance proposal the insured is given a detailed explanation in writing of the

policy benefits and provisions. (Policy cost illustrations). This would enable a comparison of insurance

policies.

The Commissioner enacted regulations which deal with the required disclosure to the proposed insured as

well as the prior insurance company in the event of the replacement of insurance policies. In this case the

insured is presented with details of what he has in the old policy and what he will have in the new policy to

afford some basis of comparison.

There are monthly reports to the media of the yields of Participating policies, Provident funds and pension

funds. These reports are also maintained on the commissioner's internet site.

A list of authorized insurance agents appears in the Insurance departments internet site so that the

prospective insured can verify the sales person is an authorized insurance agent.

Bachar - Clear definitions of the responsibilities of insurance agents, broker and investment advisors

For Motor Bodily Injury coverage (No-fault) there Commissioner's internet site allows the insured to

compare the rates for the coverage for all the companies in Israel.

The Commissioner's internet site has an interactive application which allows comparison of the yield

obtained by provident funds on a monthly or cumulative basis for the last 7 year period. This allows the

prospective insurer/saver to better manage his savings and if he desires transfer between provident funds.

Are there financial education programmes targeted to specific types of individual policyholders,

such as car/home owners, owners of a small business, etc. or to particular types of insurance such

as life insurance, health insurance, liability, annuities, etc.?

1. There are not general educational programs. However the commissioner is attempting to

increase the consumer awareness of the need for "shopping" for the best coverage by periodic

advertisement of the need to use the comparative data available on Commissioner's internet

site. The commissioner tracks the amount of usage of the site in an attempt to study its

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effectiveness. We are witness to an increased in the use of the site especially when combined

with advertising the site on the media (mainly radio).

2. In the near future, the Commissioner internet site will include a calculator which will comparethe prices for risk insurance for all the companies.

Has the government in your country undertaken programmes to address these issues or is this the

concern of the private sector? If the private sector is involved, what are the extent and respective

roles of insurance companies, mutual funds, brokers, or other insurance intermediaries, as well as

corporations in the case of group contracts? How involved are other private sector groups such as

community organizations and industry associations?

1. Most of the programmes to increase awareness, have been initiated by the government

however the private sector has placed extensive information on its internet sites. In the

past the data was not uniform in its level of detail and not all of the regulated bodies hadan internet site. . To increase the level of information and transparency the Commissioner

has required the companies to place extensive amount of information on their internet

sites for example:

a. Policies which are being used for individual and group insurance

b. Annual statement for a 5 year period

c. Dislcosure of rates of return for participating policies

2. The consumer organization and the industry associations have no programmes.

3. Question for Yadin and Sharon Health Funds

Could you give examples of public and/or private financial education programmes? Please give as

much detail as possible.

1. The Commissioner of Banks, by regulation limited the amount of credit afforded to the

public to the authorized credit limit for each individual. As a result of this regulation, some

of the banks opened up courses in budgeting in order educate the public on how to stay

with in a credit limit.

3) New opportunities are opening to insurance providers as governments begin to scale back the state-

provided benefits and as new insurable risks (asbestos, mold, terrorism, natural catastrophes) are

developed. In your country, what are the main challenges for financial education in the insurance sector

with respect to these new insurable risks?

What is being done in your country to help consumers to understand and identify risk? What

actions have been undertaken to assist policyholders in their appraisal of their needs for insurance

and in their choice of a contract and of an insurance provider?

What is being done to increase awareness of the need for insurance in specific areas such as

terrorism, catastrophic risk, and other risks where insurance demand may not be sufficient?

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1. The Cat risk in Israel is for a earthquake exposure.

a) The coverage is readily available from insurance companies. The coverage is required by

creditors in the event of mortgages. Therefore vast majority of the homes which havemortgages have earthquake coverage.

b) Periodically minor earthquakes occur in the country and major earthquakes periodically

occur in countries in the immediate region (Greece, Turkey, ....) . In both cases

extensive coverage is given to the events and the need for better regulation including

insurance coverage

c) The government appointed a committee to advise/plan the government & the public how

to better cope with natural disasters. Among the other issues discussed was the importance

of appropriate insurance. The committee is scheduled to submit its recommendations to

the government.

2. Terrorism and the damage it may cause occur on a weekly basis and are covered in Israel on

an almost daily basis in the media. The government covers individuals and business to certain

limits. Coverage beyond these limits is available from insurance companies. Insurance

companies were actively involved in promoting the coverage to individuals during the Gulf

War in the 90's.

Could you give examples of public and/or private financial education programmes? Please give as

much detail as possible.

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4) Along with financial education, there must also be an increase in financial information available to

policyholders. Several countries have noted that an important aspect of financial education is the

availability of accurate and complete information on financial products. What are the main issues related

to insurance information and the role of insurance companies and other financial institutions.

What is your country doing to increase the insurance information available to consumers? What are

the roles of the government and of the private sector in providing information about insurance

products? Information on the internet, Buyers guides, Investment results of the companies for

1. See the answers for 1 and 2

2. Information required to be presented by the insurance company on their internet site including

Periodic financial statement, examples of the various policy forms being used by the company

3. Monthly informational bulletins are prepared for insurance, pension and provident funds. Thebulletins detail the investments, yields, the risk, funds transferred between the institutions. The

purpose of these bulletins it to increase the public's ability to choose the investment body

which suit the investor with respect to yield and risk and increase the investor's awareness of

the ability to transfer funds between these investment bodies

Are there requirements for increased reporting by insurance companies, pension funds, banks, etc?

With respect to the insurance contract, what are the disclosure requirements for insurers and

intermediaries during the duration of an insurance contract? With respect to information about

insurance companies, do policyholders have access to information concerning the financial

situation of insurers? What actions should be developed in this respect?

1. Life insurance, Pension Funds and Provident funds - by regulation the companies are

required to report to the insured a detailed report of the policies and coverage the insured has

cash values, contributions made during the report period, yield and management fee

information during the reporting period, a breakdown of the investments by investment type

(bonds, stock, loans, deposits etc) There is currently a proposed Commissioners bulletin

which will require the companies to report in detail the investments for each of the

investment tracks.

2. Financial information on the insurer companies are required to maintain their financial

statements on their internet site for a period of 5 years. In addition the Commissioner has

comparative financial data on a quarterly basis for the companies on the Commissioner's

internet site. There is also comparative data whichis presented as part of the Commissioner's

Annual report (also available on the internet)

What is being done to ensure that consumers understand the information providied to them about

their insurance policy? Are there programmes aimed at improving the ability of policyholders to

understand the financial information available on insurance companies?

1. The Commissioner's internet site has buyers guide and explanatory information

(frequently asked question and glossaries ) on the different insurance products. Also the

insurance companies have information on insurance products.

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2. Periodically the information and the format provided the insureds in the annual reports

is updated so that the insured can better understand the information provided.

Please give us some examples of these programmes that provide consumers with information onfinancial products, providing as much detail as possible.

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5) A number of countries have indicated that they conduct periodic surveys of the financial literacy of

their consumers. We are interested in learning more about these surveys and their relationship with

financial education programmes. What are the main criteria used in your country to assess financial

insurance literacy? What have been the major results of such assessment?

There have been no periodic surveys of financial literacy

Muhammad verified this with the Bank of Israel and does not know of any survey conducted by

the Ministry of Finance

Are there any surveys of the financial insurance literacy of consumers in your country? How

often are they conducted?

How do the results of these surveys affect government and private programs with respect to

financial education with respect to insurance? For example, was a survey of financial literacy

conducted to determine which insurance issues were most important to or needed by

consumers? What do such surveys indicate about the awareness of consumers with respect to

insurance issues?

Could you describe the characteristics of these surveys (how and when conducted, number of

individuals surveyed, questions asked, etc.) and provide us with copies of the results?

If surveys on financial insurance literacy are not available, are the decisions about which

types of financial education programmes to offer based on studies or reports on financial

issues, advice of experts, policymakers observations, or other means?

6) Evaluations of financial education programmes are important in order to determine whether

programme objectives have been achieved. What actions have been undertaken in this field? What are

the main criteria to assess financial education programmes with respect to insurance issues?

Have there been any attempts to measure the implementation and effectiveness of the

insurance-related financial education programmes referred to above or to identify best practices

in the provision of financial education?

1. With respect to the Commissioner's MBI comparative price calculator and Yields for

Provident funds, the number of times the site was viewed has been tracked for several years. We are

witness to increased usage of the site by the public. This is especially evident after the "site" has been

advertised on the radio.

Are there any criteria or standards that have been developed to evaluate financial education

programmes related to insurance issues? Have there been attempts to define and measure the

outcomes of these financial education programs?

1. We are witness to a large transfer of funds from provident funds maintained by the banks

to Private provident funds, we attribute this to 2 reasons - bulletins to the public in which gave

expression to the higher yield generated by the private provident funds and the vast increase in the

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amount of funds transferred to the private provident funds so the investor will understand that there is

no problem in leaving the provident funds managed by the banks. The second reason is the marketing

by carried on by the private provident funds

Could you provide us with copies of these studies, criteria or outcomes?

o Data for the increase in the private provident funds, transfers between funds

o Data on hits on the site

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7) Finally, we would like to ask you for your thoughts about the future direction of financial education and

any suggestions you have for other policymakers wanting to implement financial education programmes.

What recommendations do you have for future projects in the area of financial education? For

example, what additional functions can financial education programmes play in helping consumers

understand and deal with changes in private pension arrangements, the increased competition and

the increased number and complexity of products in the insurance market, and the increased

volatility in financial markets?

To advance the level of awareness

)1 financial education programs should be started on an elementary school level.

)2 Period education seminars in community centers

)3 Increased advertising in the media- newspapers, radio and television- of the importance of

long term saving/insurance

)4 Making data available in plain language to the public for example buyers guide, periodic

bulletins to the media

)5 Internet interactive applications which allow comparison of data for various financial entities

or products

.2 The above should be supported by surveys to understand where there are deficiencies in the level

of awareness and surveys which will measure the effectiveness of the previously suggested

processes

For other countries wanting to implement financial education programmes similar to yours, do you

have suggestions as to approaches they should take or pitfalls they should avoid? What things

would you do differently if you could do them over? What things worked well that you would do

again?

In spite of the fact we have not carried out any surveys, with a doubt the use of the internet for the

dissemination of information and applications which allow for comparison between different products

or companies, which are further supported by periodic bulletins to the media are effective for raising

public awareness. It is difficult to measure the level of effectiveness without surveys/

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PART II:

Additional policy issues

What type of financial education is most needed by consumers with respect to insurance

increasing awareness of insurance needs, providing basic understanding of insurance principles,

or providing information on specific types of insurance?

Increasing awareness of insurance needs of the public is two areas (1) long term saving in life

insurance and pension and (2) Long Term Care

What are the specific obstacles to the provision of financial education in the insurance industry?

The product is complicated and abstract so that the public can not easily understand it.

What are the most effective ways of making consumers aware of insurance issues and informing

them about specific types of insurance? Typically, are consumers provided with ex-ante

simulations or projections of coverage and cost where appropriate? Is this compulsory in certain

lines of business?

Buyers guides which describe the various insurance options.

This is appropriate by those lines of insurance which are long term and more abstract such as life

insurance, long term care and disability insurance.

As mentioned above with the issuance of policies, policy cost illustrations are given to the insureds

Can compulsory insurance be considered an efficient alternative to increase awareness of

insurance needs? If compulsory insurance is introduced, is an increased role for government in

informing consumers about these particular policies still needed?

Even with effective awareness there will always be parts of the population which will not be

covered due to financial considerations. . In Israel MBI and Health insurance are compulsory,

currently there are discussions of have compulsory pensions.

If compulsory insurance is introduced the government will have an increased role in informing the

consumer as well as following up the compliance with the compulsory requirements.

The insurance sector has always been characterized by an asymmetry of information between

insurers and policyholders. What is being done to help consumers understand insurance policies

(terminology, contract provisions, exclusion etc.) and the functioning of insurance markets? How

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easy is it for consumers to be able to compare different insurance policies? What are the legal or

regulatory protections for insurance policyholders, for instance, in the case of mis-selling?

The first 2 questions were answered above.

With respect to mis-selling if found that the company/broker mislead the insured then the company

can be fined in extreme situations there can be criminal prosecution of the perpetrators of the mis-

selling

What should be the relative roles of financial education and regulation in protecting the insurance

consumer? Should financial education and regulation be viewed as complements or substitutes?

Is it the case that a more financially literate population would reduce the need for and reliance on

regulation?

Financial education and regulation are complementary. In most cases increased "regulation" requires

the companies to provide the insured with additional information if it is the information that is

supplied with the initial application, the annual report to the insured or financial data on the internet

such as the yield, investments policy and detailed listing of investments Information which would

not have been readily available to the insured without regulation.

What distinguishes financial information from financial advice on particular products? What is

the best way for financial institutions to provide financial information on insurance without

providing financial advice on particular products? Or should financial information best be left to

the government or independent bodies to provide?

Comparative financial data for an industry can only be accumulated in an effective manner if there is

a regulatory requirement for that data. In theory the regulator can require and insure that the data is

submitted in a uniform manner on a timely basis. The data needs to be presented in its entirety with

possible giving the prospective insured the option of sorting or filtering the data for analysis. With

respect to advice as to which investments are preferred for the insured that would have to left to

financial advisors which tailor the coverage/investment to the needs, abilities and desires of the

prospective investor/insured.

Suggestions for good practices

In the light of presentations and discussion held at the 75th session of the IPPC, Delegates, who

have not already done so, are particularly invited to provide guidance for the drafting of good practices

with respect to financial education and insurance and to list the top 10 priorities that these good

practices should cover.