Public Appeals
Annual Report 2004
The Capital Market, Insurance and Saving Division
Contents
Introduction........................................................................................................................ 3
Rulings on matters handled by the Public Appeals Unit.................................................... 8
Section B............................................................................................................................ 39
Rating of Insurance Companies according to Public Complaints Resolved in 2004........ 42
Appendix A........................................................................................................................ 46
List of Tables
Table 1
Table 2
Table 3
Distribution of Insurance-related Complaints............................................ 39
Rating of Insurance Companies for 2004 All Insurance Lines.................. 44
Rating of Insurance Companies for 2004 Health Insurance Line.............. 45
List of Charts
Chart 1
Chart 2
Chart 3
Distribution of Insurance Company Decisions according to the
Exercise of Rights Procedure in 2004........................................................ 40
Distribution of Rulings by the Public Appeals Unit on Complaints Rejected
under the Exercise of Rights Procedure in 2004........................................ 40
Duration of Handling Time of Complaints Handled According
to the Exercise of Rights Proccedure 2004................................................ 41
Annual Report 2004
Public Appeals
Introduction
The Public Appeals Unit at the Capital Market, Insurance and Savings Division investigates
consumer complaints against the insurance-related actions of insurance companies and
insurance agents, including complaints regarding pension funds. The Unit also investigates
consumer complaints against provident funds that are certified as such under the Income Tax
Regulations (Rules for Approval and Management of Provident Funds), 5724 – 1964.
Complaints are investigated pursuant to Sections 60-62 of the Insurance Business (Control)
Law, 5741 – 1981, which empower the Commissioner of Insurance to investigate consumer
complaints against the insurance-related actions of insurers and insurance agents. Pursuant
to the provisions of the law, a complainee (insurer or insurance agent) who refuses to correct
an irregularity found in his actions, in accordance with a ruling issued in his case, may
appeal the ruling in district court.
The objectives in investigating complaints are 1. to investigate consumer complaints against insurance companies and insurance agents,
to determine the findings in complaints, to issue instructions to rectify the irregularities
found, both on an individual level and as a matter of principle;
2. to increase the enforcement on supervised entities and to formulate an insurance control
policy on issues pertaining to insurer-insured relations and agent-insured relations;
3. to enhance consumers’ awareness of how to fully exercise their rights;
The findings that come to light in the investigation of complaints serve as a control and
enforcement tool by the Commissioner of Insurance. When it comes evident that the issue
concerns all insurance companies, the matter is handled through the Commissioner’s
circulars or via fundamental rulings.
When, during an investigation of an individual complaint, it comes clear that at issue
is a matter requiring that the irregularity be corrected by way of a rule applicable to
all insurance companies – the complaint is converted to the status of a “fundamental
ruling,” which has binding validity vis-à-vis all insurance companies.
Fundamental rulings are publicized on the Ministry’s website and are sent to the attention
of all public appeals ombudsmen at the insurance companies. Recently, the decision was
reached to distribute these rulings also in draft form to the insurance companies and
insurance agents for their comments, and to specify in the body of fundamental rulings
that insurance companies are entitled to appeal any such ruling in district court.
In 2004, there were a number of fundamental issues on the Unit’s agenda, some of which
Annual Report 2004
Annual Report 2004
The Capital Market, Insurance and Saving Division
were even formulated to the point of circulars or fundamental rulings, which were distributed
as drafts to the supervised bodies, including: in the area of the relations between insurance
agent and insured regarding the use that insurance agencies and agents make of the name
under which they are brokering an insurance transaction; in the health insurance and longterm care lines; in the area of the relations between insured and insurer regarding insureds’
authorization for effecting payments via standing orders and the way by which insurers must
make use of these authorizations, and regarding the wording of release and receipt notes,
which are required from insureds when claims are cleared by insurers, and from claimants
who receive insurance benefits from insurance companies.
Sometimes, subsequent to investigations of consumer complaints against insurance companies
and against insurance agents, and their findings, the Unit proposes to institute administrative
proceedings against these complainees, such as the imposition of administrative penalties or
the revoking of an insurance agent’s license.
General
The Unit’s work focuses mainly on the ongoing handling of consumer complaints against
supervised bodies that are received each year. Since 2004, public appeals have been forwarded
for direct handling by the insurance companies, and it is incumbent upon them to investigate
and respond directly to the complainants, with a copy to us (hereinafter: “Exercise of Rights
Procedure”).
Complaints against complainees other than insurance companies, such as insurance agents,
pension funds and provident funds, are still being handled according to the standard handling
procedure, as was done in previous years.
Characteristics of Public Complaints in 2004
During 2004, 3,727 public appeals were received by the Public Appeals Unit. Since, in some
of the cases, the complaint was against more than one supervised body, in total, 4,223 appeals
were recorded against supervised bodies. Approximately 90% of the appeals are in the
insurance sector. There was a 40% increase in the number of complaints in 2004 compared
to 2003. This significant increase that occurred in the number of complaints received in
1. The terms mentioned in this chapter marked in blue may be found in the Glossary in Appendix A to this
chapter.
Annual Report 2004
Public Appeals
to 4% (137 complaints) in 2003; i.e., a 50% rise in the ratio of justified complaints to total
complaints received.
In 2004, 573 complaint files were opened against insurance agents and, together with a
backlog of 228 files from previous years, the Unit handled a total of 801 such files, out of
which, the handling was completed in 555 files. Of the complaints against agents that were
resolved, 10% of the complaints were found to be justified (53 complaint files), while in
27 complaint files, the handling was forwarded to the supervisory level. Ninety-six of the
Annual Report 2004
2004 indicates an exceptionally adverse change compared to the trend that had persisted
since 1997, but it corresponds to the general trend of increased numbers of complaints
received by insurance companies from that year onwards.
In 2004, 2,135 complaints were handled according to the Exercise of Rights Procedure.
Insurance companies cleared 569 complaints according to the Exercise of Rights Procedure,
and complainants accepted the companies’ explanations in 528 complaints. In total, 1,610
complaints were resolved in 2004. Therefore, operation of the Exercise of Rights Procedure
led to the situation whereby we were not required to intervene at all in 33% of all complaints
received by the Public Appeals Unit, and our handling of them was limited only to the
administrative aspect of the complaints. These proceedings significantly shortened the
duration of complaint handling in the insurance sector, as the data presented below show.
The complaint handling time lasted an average of three months in 2004, compared to about
10 months that were customary in 2003 according to the standard handling.
From scrutinizing the data, it is possible to determine the handling quality index of the insurance
companies in relation to complaints filed against them. This index derives from the resolution
categories of the complaints decided by the Public Appeals Unit after the claims were rejected
by the companies according to the Exercise of Rights Procedure. The basis for this calculation
is taken solely from the total complaints that were within the Unit’s purview to resolve, i.e.,
complaints not involving, for example, factual disputes or legal proceedings. The data indicate
that, from 220 complaints that could be resolved, in 28% of the complaints rejected by insurance
companies, the Public Appeals Unit ruled that the companies’ handling of the complaints was
inadequate. These complaints were found to be justified or partially justified, and in these
complaints, we ruled that there had been an irregularity in the company’s action.
In most of the instances where the complaints were found to be justified, the ruling was
referred for resolution by the internal auditor of the insurance company, through exercise of
his authorities pursuant to the Insurance Business (Control) Law, 5741 – 1981.
Out of all complaints investigated in the insurance sector this year, there was a significant
rise in the number of justified complaints, which reached 6% (182 complaints), compared
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The Capital Market, Insurance and Saving Division
complaints were found to be unjustified, and, in 80 files, the parties reached an agreement
between them for resolving the dispute. The remaining complaints were resolved under other
categories, according to the circumstances of each complaint.
In 2004, the need for intervention by the Commissioner of Insurance, from amongst those
complaints for which it was in the Commissioner’s purview to intervene, totalled 1,443, complaints
out of 1,563 which were investigated according to the Exercise of Rights Procedure).
For additional data about the annual trends in the volume of appeals and the handling thereof,
see Section B. of this report.
Objectives of the Public Appeals Unit
One of the main objectives of the Public Appeals Unit is to improve the service to the
appealing public, to increase the availability of the service, and to shorten the duration of the
appeals handling until a final answer is given.
The year 2004 was characterized particularly by improved service to the public and by
improved service to the insurance companies. For this purpose, two information systems
were operated for the public on the Internet. The first enables the public to submit complaints
to the Public Appeals Unit via an easy on-line, interactive application. Complaints may be
submitted against insurance companies, insurance agents and insurance agencies via the
internet, and documents can even be attached to the complaint – and all via the complainant’s
personal computer. The second is designed for the public who has already submitted a claim
to the Public Appeals Unit. This system enables him to monitor the status of the handling of
his complaint, by entering the password issued to the complainant in the acknowledgement
letter sent to him upon receipt of his complaint.
Another on-line system was developed for the use of insurance companies. This system enables
all ombudsmen access to reports about complaints submitted against insurance companies, and
enables them to monitor the status of the complaints lodged against them, including viewing
and downloading of the complaint documents and letters pertaining to the complaint, directly
via e-mail. This system enables the Unit to forward complaints and all communications with
insurance companies by e-mail, which saves valuable time in complaint handling.
2. Intervention was not possible in 120 complaints. Complaints resolved with the Commissioner’s
intervention include: justified complaints, unjustified complaints, uncontested complaints (partially
justified). Complaints resolved without the Commissioner’s intervention: resolved through adjudication,
when the complainant agreed to the company’s position, administrative closing.
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Public Appeals
Volume and nature of the investigations of complaints by rulings
In another judgment, given in case 714/01 Yoslavsky versus the Commissioner of Insurance
at the Haifa District Court, the authority to issue instructions for pecuniary charges within
the scope of ruling on complaints was approved, when the complaint is found to be justified,
and when the actions amounted to violations of circulars of the Commissioner of Insurance
or provisions of law.
Annual Report 2004
In 2004, important judgments were issued regarding the authorities of the Commissioner
of Insurance, which are operated by the Public Appeals Unit in its investigation of public
complaints. They pertain to the Commissioner’s authorities to interpret the provisions of
law, to the Commissioner’s authority to interpret insurance policies, as well as the remedies
that he can grant to complainants when, according to the findings in the complaint, the
complaint was found to be justified, inclusive of his power to impose a pecuniary penalty on
insurance companies.
The issue of the validity of the fundamental rulings and the authorities of the Commissioner
of Insurance to obligate the insurance companies to comply with that prescribed in these
fundamental rulings, was deliberated upon in court in 2004, both directly, when appeals of
the Unit’s decisions were filed, and indirectly, when insureds petitioned the courts to deem
these rulings as binding instructions having incidence between insureds and insurers, also in
courts where adjudication is being conducted between the parties.
At the end of 2003, a judgment was issued in two files joined by the Tel-Aviv District Court, by
Judge Sara Dotan (Petition to Appeal 2656/02 Goldberg Lawrence versus Direct Insurance,
Civil Appeal 2066/02 Clal Insurance Company Ltd. versus the Commissioner of Insurance).
A petition to appeal the judgment issued in these cases was filed at the Supreme Court.
In the said judgment, and in another ruling issued by the Haifa District Court (Civil Petition
12838/02 Hachsharat Hayeshuv Insurance Company Ltd. versus Gidulei Sadeh Netufa
Agricultural Cooperative Ltd., Judge Cohen presiding), it was ruled that validity must be given
to the individual rulings and to the fundamental ruling. Judge Cohen ruled as follows:
“If we implement the said statements regarding the Commissioner of Insurance’s directives,
which are being heard in the petition before me to correct the statement of defense, then
the conclusion that is called for is that the Commissioner had been authorized, and had
also been authorized to issue the directive. As a corollary to this, the proper judicial policy
should, prima facie, give full validity to the directive, in order to safeguard and strengthen
the Commissioner’s actions, which are been done in order to protect consumers.”
Annual Report 2004
The Capital Market, Insurance and Saving Division
Rulings on matters handled
by the Public Appeals Unit
General
1. It is compulsory for insurance companies to respond to every communication from
insureds in a straightforward fashion and within a reasonable length of time
The complainants contacted the insurance company and requested to receive a copy of the
declaration of health and the conditions of the group long-term care insurance policy for
members of the group to which the complainants belonged, and under which, the said group
of insureds had been insured during the previous period. The complainants claimed that the
insurance company did not respond to their request.
The complainants needed these documents in order to verify their claim that an excess
premium had been collected from them, both by the previous insurance company that had
insured the insureds and by the present insurance company.
It was ruled that the proper running of an insurance company requires that any insurance
company that receives a communication from an insured or from someone who formerly
had been insured by the company, must respond to the communication in a straightforward
fashion and within a reasonable length of time.
It was further ruled it is unacceptable that an insured who communicates with an insurance
company will only receive a response to his communication after he appeals to the
Commissioner of Insurance.
Therefore, the complaint was deemed justified, and an instruction was issued to the insurance
company to send those documents to the complainants that they had requested, with a copy
to our office. They were further instructed to amend their working procedures in light of the
findings specified in the ruling.
2. Remedies to be granted to insureds when an insurance company changes the premium
during the period of insurance
Subsequent to an investigation of a complaint regarding a change in premium during a period
of insurance, it was ruled that if proper disclosure that the premium varies with the age of the
insured was not given in the insurance proposal at the time the insured joined the insurance plan,
then such change in premium contradicts the duty of bona fides that is imposed on insurance
companies. The insured is entitled to the remedies specified in Section 14 of the Contracts Law
(General Section), 5733 – 1973 in respect of engagement in a contract by error.
Annual Report 2004
Public Appeals
Consequently, an instruction was issued to the insurance company to cancel the insurance
contract, if the insureds notify the company of their desire to cancel the contract, within 14
days of the date we gave our decision to the complainant.
If the insureds are able to show in court that the insurance company’s advertising had been
misleading, according to the provisions of Section 55(b)(4) of the Control Law, then the
provisions of Section 15 of the Contracts Law (General Section), 5733 – 1973 will apply,
and they will be able to exercise their right pursuant to Section 108 of the Control Law and
prove the damages caused to them as a result.
4. The duty of an insurer to obtain the express consent of an insured to join the insurance
policy
“Parents” magazine launched a campaign to their subscribers to subscribe them to a health
insurance policy for two months free. Some of the subscribers did not give notice of their
desire to discontinue the insurance, and, as a result, the insurance remained valid and they
were charged with the payment of a premium. When they discovered this, they addressed a
complaint to us.
It was ruled that insureds may not be subscribed in this fashion, since it contravenes the
provisions of the law. A person’s silence may not be deemed consent to enter a contract,
which imposes contractual obligations on him. Furthermore, in such instances, there is
a concern that a misleading description might have been given orally with regard to the
premiums, pursuant to Section 55 of the Control Law.
Annual Report 2004
3. Insurance companies have the right to refuse to insure insureds
An insured received notice from his insurance company that it is not prepared to renew his
automobile insurance for an additional period. The insured alleged that this was due to a
complaint he filed against the company to the Commissioner of Insurance.
It was ruled that it is exceedingly grave if there are grounds for the complainant’s claim, and
therefore, in such instances, we will find such complaint to be justified. Our position is that,
notwithstanding an insurance company’ right to cancel an insurance contract at its discretion
on reasonable grounds, in accordance with the insurance contract, an insurer is subject to
its duties under civil law, as well as its obligation to fulfill its duties of bona fides when
performing the contract, as long as the other party is fulfilling its duties, in accordance with
the contract. The aforesaid is in accordance with the provisions of final clause of Section 39
of the Contracts Law.
Annual Report 2004
The Capital Market, Insurance and Saving Division
5. Policy exclusions may not be included in the definition of the insured before the
Elementary Insurance Department’s consent has been obtained
An insurance company insured the employees of an employer under a special policy, which
contained a definition of the insured. In this definition, the insurance company was not
satisfied with determining the status of the employer’s employees, and added, alongside the
status of the employee, conditions, exclusions and restrictions pertaining to the scope of the
insurance coverage upon the occurrence of the insurance event (which had been covered under
the policy). When an accident occurred to one of the employer’s employees, the insurance
company refused to pay insurance benefits, alleging that, according to the circumstances of
the accident that befell the employee, he is not included amongst the employer’s employees,
and that therefore, he is not entitled to insurance benefits. The reasoning that the insurance
company had given was that he is not an employee, when the conditions are met that are
specified under the definition of “employee” specified in the policy. Therefore, the insurance
company refused to issue him the policy, and as a result of this, the employee could not file
a claim to the court.
It was ruled that an insurance company cannot stipulate, under the definition of “insured,”
exclusions and limits to its liability pursuant to the policy for an insurance event, and this,
by way of including them under the definition of the “insured.”
Pursuant to the law, exclusions and restrictions in a policy must be specified either in a
separate provision in the policy in a bold font, or adjacent to the matter. Therefore, when
the restrictions relate to the circumstances that shall be recognized as an insurance event,
it had been incumbent upon the company to include these restrictions in its description of
the “insurance event,” as defined in the policy, and for which the insurance company had
undertaken to provide insurance coverage.
That being the case, the insurance company was obligated to issue the policy to the employee,
so that he could file a claim in court, and the circumstances of the dispute would be examined
during the claim.
6. Is an insured entitled to the insurance benefits prescribed in a policy, which was
issued to the insured as a result of an error by the insurer and of which the insured was
unaware?
Due to an error in an insurance policy proposal that the insurance company offered to the
insured, on account of the fact that the insured’s son was beyond the entry age prescribed for
this insurance proposal, the insurance company issued the policy according to the entry age
of the son, at the time that the insurance contract was contracted.
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Public Appeals
7. The legal position of an insurer, who was informed of nondisclosure of a material
detail by an insured, and failed to act
An insured delivered documents to his insurance company within the scope of a claim due to
a work disability pursuant to the policy. Amongst the documents exchanged, the insured was
asked to specify what his main medical problems are today. The insured wrote: “infectious
mononucleosis, sarcoidosis, joint pains, chronic fatigue, and respiratory difficulties – illnesses
that the insured suffered concurrently. The insurance company also possessed medical records
from the insured’s medical file. The insured has an additional policy that he had purchased
from the insurance company, after he became ill with these illnesses.
Section 7(a) of the Insurance Contract Law, 5741 - 1981 grants the insurer the right to
cancel the contract, pursuant to the conditions stated therein, and subject to the provisions
of Section 8 that restrict the insurer’s right in the instances specified therein. The contract is
not automatically cancelled, but rather, continues in force and is binding upon the parties as
long as the insurer does not exercise its right to cancel. Exercise of the cancellation option
requires that written notice be delivered to the insured within 30 days of the date that the
insurer learned of the breach. Cancellation of the contract comes into force, in accordance
with the provisions of Section 10 of the law, 15 days after the notice is delivered. If the
insurance event occurs before the cancellation comes into force, the insurer is obligated to
pay reduced insurance benefits as prescribed in Section 7(c) of the law.
It was ruled that an insurer, who knew about the nondisclosure, but opted not to operate
its cancellation option, in effect has waived its right to operate the reduction remedy upon
occurrence of the insurance event. When the insurer was informed of the concealment of
an important fact, which enables it to cancel the insurance contract, and the insurer did not
exercise this right, it is tantamount to its agreeing to this concealment and thus, the insurer
cannot claim that, had it known about the concealment, it would not have contracted the
insurance contract.
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It was ruled that, under such circumstances, when the insured was unaware of the insurer’s
error, the insurance company must bear the consequences of its error. The insurance company
acted contrary to the law in that it issued a policy that does not correspond to the proposal
offered to the insured.
An instruction was issued to the insurance company to pay the insurance benefits to the
insured, being calculated according to the sums specified in the policy that it should have
issued according to the insurance proposal, and not according to the policy issued by the
company, and to bear the differential between the two plans.
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The Capital Market, Insurance and Saving Division
It was further ruled that the company must review the work procedures according to which it
is operating, since it is advisable that information furnished to it within the scope of a claim
be crosschecked against the declarations of health that it possesses in other policies of that
same insured.
This instruction was issued to the insurance company by virtue of the provisions of Section
8 of the Insurance Contract Law, 5741 – 1981, which prescribe that an insurer who knew, or
could have known with reasonable effort, the true situation, and failed to take action, is not
entitled to exercise its right to cancel the contract, pursuant to Section 7 of the law.
8. Is an insurance company entitled to offset loans from insurance benefits that an
insured is entitled to receive?
A complainant claimed that his insurance company offset from insurance benefits due to him
an outstanding debt in respect of a loan that the insured obtained from the insurance company.
The insurance company justified its actions by stating that, according to the company’s
computer code, the insured took the loan from the company at the expense of benefits.
According to Israeli law, charges may be offset only if they derive from the same transaction.
That being the case, and since the charge in respect of the loan is not a charge deriving from
the principal transaction, being the insurance transaction, it was ruled that the insurance
company does not have a right by law to offset such a charge against the insurance benefits.
The insurance company shall have a right to offset a loan debt from payments due to the
insured only if the insurer possesses proper proof of the insured’s consent to this offsetting.
We could not accept the company’s claim that the mere fact that a code exists in the company’s
computer is sufficient to indicate such consent. Therefore, it was ruled that the company
is not entitled to offset the loan from the insurance benefits. Consequently, the insurance
company was obligated to pay the insurance benefits in full.
9. Is an insurance company entitled to cancel an insurance contract when it made an
error during the underwriting?
An insurance company requested to cancel an insurance contract, during the period of
insurance prescribed therein, because of an underwriting error by the company.
The insured did not know about this error until the company notified him of its intention to
cancel the contract.
The complainant referred to us and asked to verify if indeed, the company acted lawfully.
We examined the policy, and found that, pursuant to the contract, the company had not
been entitled to cancel it by a unilateral notification, but only in the event of a failure to pay
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Public Appeals
premiums. Since the complainant had regularly paid the premiums, the only way to cancel
the contract in the instance of an error, would be pursuant to the provisions of the Contract
Law (General Section), 5733 – 1973.
Pursuant to the provisions of Section 14 of this law, in an instance whereby a party to the
contract was unaware of the error of the other party, the court may cancel the contract if
it deems that it would be just and equitable to do so, and, in such instance, the court may
adjudge the erring party to pay compensation for the damaged caused to the other party due
to contracting of the contract. These provisions also prescribe that an error is not a cause for
cancellation of the contract, if the contract may be performed after correction of the error,
and the other party gave notice, before the contract is cancelled, that he is willing to do so [to
proceed with the contract after correction of the error].
These provisions are based on the general principle of the duty of “honoring a contract.”
Therefore, it was ruled that the insurance company that committed an error in the underwriting
– is not entitled to cancel the insurance contract unilaterally when it discovers the error, and
that the insurer must apply to the court with a petition to cancel the contract.
10. Fairness in clearing a claim under property insurance – failure to fulfill the security
conditions stipulated by the insurer
An insurance company rejected a claim of burglary of tankers on the premises of the
insureds’ factory. The claim was rejected on the cause that the insured failed to fulfill the
security condition stipulated in the policy. It was ruled that the insurer is not entitled to
reject a claim solely due to the fact that the insured breached the security condition that
the insurer had stipulated, and this, after the insurance event occurred. This duty of the
insurer is applicable to all types of property insurance, because the security condition is
not a precondition to inception of the policy. Section 21 of the Insurance Contract Law,
5741 – 1981 (hereinafter: “the Insurance Contract Law”) and Regulation 4 of the Insurance
Business (Control) Regulations (Policy Format and Conditions), 5740 – 1980 (hereinafter:
“Regulations Regarding Policy Format and Conditions”) prescribe provisions concerning the
security measures in the policy. According to these provisions, if the policy was not cancelled
prior to the occurrence of the insurance event, the insurance company must pay full insurance
benefits, unless it carried the burden of showing that a reasonable insurer would not have
engaged in the insurance contract had it known that the property had not been protected by
the means of security that the insurer had required, even for a higher premium, and that the
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Property Insurance - General
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The Capital Market, Insurance and Saving Division
fact that the insured did not take any precautionary measures had an impact on the insurance
event. Sometimes, the insurer might be obligated to pay only reduced insurance benefits. The
insurance company will not be exempt from paying insurance benefits, when the security
conditions that the company required were not performed by the insured, the insured notified
the insurer that he does not agree to the security conditions that the insurer stipulated, and the
insurance company does not act in conformance with Regulation 4 of the Insurance Business
(Control) Regulations (Policy Format and Conditions), 5840 – 1980, and did not exercise its
right to cancel the policy subsequent to such notification.
11. Discriminatory stipulations in a consent form for a polygraph test
An insured was required to sign a consent form to undergo a polygraph test, following a
dispute regarding the proper working order and operation of the means of protection in his
vehicle which had been stolen, but claimed that the stipulations are discriminatory.
Since the opinion of the Attorney-General was promulgated in this matter, and since the
Commissioner of Insurance adopted that opinion and instructed the insurance companies
to comply therewith, after we examined the stipulations in the said form - we ruled that
stipulations were indeed specified that contradict the opinion, since one stipulation barred the
insured from appealing to court, in a manner whereby the results of the polygraph test would
constitute final and conclusive evidence in court, and would be binding upon the parties for
all intents and purposes, without the insured being entitled to submit any other evidence.
According to another stipulation, if the insured did not agree to undergo the polygraph
test, this would constitute confirmation of his consent to waive his claim. Therefore, an
instruction was issued to the insurance company to revise the wording of its stipulations. A
copy of the decision was also forwarded to the internal auditor of the insurance company so
that he would ensure that the instructions issued in this regard would be fulfilled, and this,
in accordance with the provisions of Section 92(b) of the Insurance Business (Control) Law,
5741 – 1981.
Homeowners insurance
12. Do the exterior walls of an apartment constitute part of the apartment or part of
the common property?
The insurance company refused to compensate an insured for the full damages that were
caused to the exterior walls of the building, in the part that belonged to the insured’s
apartment, and consented to pay him only up to his share in the common property. The
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Public Appeals
13. In homeowners insurance, the duty of substantiation includes the duty to furnish
the appraiser’s report
The apartment of the complainants was burglarized and jewelry and various valuables were
stolen from it. After the insurance company received the report of the appraiser sent on its
behalf, the insurer notified the complainants of its willingness to pay, as a compromise, only
about half of the sum claimed, since, according to the findings of the investigation conducted,
the insureds had exaggerated the sum of the claim. The insurance company refused to forward
the appraiser’s report to the insureds. The insurance company did not claim that the insured
had not proven the insurance event or that they did not fulfill the security stipulations specified
in the policy. It was ruled that the insurance company acted in violation of our fundamental
ruling regarding the insurer’s obligation to notify insureds of its position regarding the claim,
since the supply of a general explanation regarding an exaggeration in a claim and an offer of
a global sum – is not proper – it cannot be deemed a reasoned and detailed rejection. In such
instance, it is incumbent upon the insurance company to specify which of the items, in its
opinion, were not stolen at all, and with respect to which items the insureds had exaggerated
the sums in their claim, as well as the sum that the insurance company is willing to pay for
each of the items.
It was further ruled that if an insurance event occurs and an appraiser’s report is prepared by
the insurance company in relation to the insurance event, the insured is entitled to receive
the appraiser’s report. It is incumbent upon the insurance company to conduct itself with full
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insurer’s refusal derived from its reliance on the definition of “common property” prescribed
in the Land Law.
The policy, which was worded similarly to the standard condominium insurance policy, did
not contain a definition of “common property” and there is no reference to the definition of
“common property” in the Land Law.
Our position is that the intention of the deputy lawmaker in the standard policy should be
interpreted according to the nature of the common property, and while taking into account
the circumstances of each individual case, without the definition of “common property”
contained in Section 52 of the Land Law being used to the detriment of an insured in an
condominium insurance contract.
According to this material test, the apartment owner is entitled to indemnification in respect
of damage caused to the exterior wall of the building – whether it abuts the walls of his
apartment or does not abut the walls of his apartment – only up to the insured’s share in the
common property.
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The Capital Market, Insurance and Saving Division
transparency when clearing a claim, and to enable the insured to check whether the insurance
company paid him the insurance benefits pursuant to the sums confirmed by the appraiser, as
well as the method of calculation of their value, the insurance benefits to which the insured
is entitled as a result of that stated in the appraiser’s opinion, and with respect to which
items did the appraiser rule that the theft thereof and/or the value thereof were not proven
by the insured. Therefore, an instruction was issued to the insurance company to issue the
appraiser’s report to the insured, at its initiative, in respect of every claim that the insurer
approves only partially.
14. Is negligent conduct by an insured, which caused flooding of his apartment, covered
by homeowners insurance, if it occurred prior to obtaining the consent of the Elementary
Insurance Department?
An 85-year-old, childless insured rushed to leave her home for a funeral and forgot to close
the faucet in the bathroom sink. As a result, her apartment was flooded and damage was
caused to the insured’s property. The insurance company rejected the claim, despite the fact
that the insurance policy included an expansion to cover water and other fluid damages. The
insurance company explained its rejection with the claim that “the flooding originating in an
interior faucet is not covered, since the flood coverage is conditional upon an exterior water
source. Furthermore, the insurance event in the expansion of the coverage for water damages
covers leaking and overflows of water boilers, and not the insured leaving a faucet open,
when no damage to the piping was found.” It was ruled that the negligent conduct by the
insured is not sufficient to exempt the insurer from its liability pursuant to the policy. One of
the principal objectives of insurance contracts is to protect insureds from the consequences
of their negligence. The risk that the insurance event might transpire due to the negligence of
the insured or of someone else residing in his apartment, children and the elderly, is one of
the types of risks that the insurer must anticipate within the scope of a homeowners insurance
contract, and, in any case, it was also given expression in the setting of the premium rates.
It was further ruled that, since the homeowners insurance policy was expanded to cover
water damage as well, then coverage also exists for the instance described in the complaint.
This, also according to the language of Regulation 3 of the Regulations, and according to the
objective of the standard policy, which is considered by the parties in such a contract. In our
opinion, the terms mentioned in Regulation 3: “leaking” and “seepage” are broad enough in
order to provide coverage for any damage or loss caused as a result of fluids that “escaped”
suddenly and all at once from the plumbing and heating fixtures of the apartment, as well as
to provide coverage for any damage or loss caused as a result of liquids that “leaked” over
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Public Appeals
15. An insurance company’s obligation to comply with the law when investigating insureds
The complainant had submitted a claim to his insurance company in respect of burglary of
his apartment and theft of various items. The insurance company sent an appraiser on its
behalf and the insured cooperated with the appraiser. After about two weeks, the insurance
company demanded that the insured undergo an interrogation by a private investigator on its
behalf, a licensed investigator, and stated that this was a matter of routine at the insurance
company for claims exceeding a certain sum. The complainant objected to this demand by
the insurance company, and stated that he would be willing only to respond in writing to any
question posed by the insurance company or by an employee on its behalf.
In its response, the insurance company referred us to Section 23 of the Insurance Contract
Law, 5741 – 1981, and, according to the insurance company, insurance companies avail
themselves of the services of detective agencies in order to obtain the information they need
to verify their liability, and that, in this case, the insured had not cooperated fully with the
investigator, who is an agent of the insurance company.
We clarified to the insurance company that the obligations imposed on the insured pursuant
to Section 23(b) of the Insurance Contract Law regarding cooperation on the part of the
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a protracted period – whether they occurred intentionally or unintentionally by the insured.
This interpretation is warranted also in light of the rule of interpretation in relation to the
drafter, whereby the interpretation that favors the insured is to be preferred.
The concern of the parties in a homeowners insurance contract, at the time an expansion
is purchased, is to provide coverage for any damage or loss caused to the apartment or to
its contents due to damages caused as a result of fluids originating in the plumbing pipes
belonging to the apartment, and therefore, the purpose of the contract must be interpreted
in this fashion. Consequently, insurance events, which were caused with bona fides, due
to distraction, by mistake, or due to haste or a particular mental state of the insured, or of
anyone residing with the insured, are covered according to the standard policy.
In light of that stated above, we instructed the insurance company:
a. to attend to notifying all those concerned in the company about our position as stated;
b. to take action to revise the company’s procedures so as to ensure compliance with our
position when clearing similar claims;
c. to pay the insured the insurance benefits that are due to her pursuant to the conditions of
the insurance contract, in accordance with the opinion of the appraiser whom the insurance
company had sent to appraise the insured’s damages, plus linkage differentials and interest
as required by law.
Annual Report 2004
The Capital Market, Insurance and Saving Division
insured are conditional upon the insurance company conducting itself in an acceptable
manner and with bona fides with respect to performance of its obligations pursuant to the
contract, and that its demand for cooperation, as well as its procedures, should pass the test
of reasonability.
We did not find any defect or detriment to the welfare of the insureds or any contradiction
to the provisions of the law or our instructions in the procedure prescribed by the insurance
company. This, to the extent that this procedure is operated equitably – and as long as the
company enables the insured to appeal to it in exceptional circumstances.
Regarding the insured’s demand to be interrogated by the insurance company and not by
a private licensed investigator pursuant to the Private Investigators Law, 5732 – 1972, we
ruled that insurance companies do not have the tools to investigate insureds and, in any case,
insurance companies are prohibited from doing so by law. Pursuant to the provisions of the
Private Investigators Law, 5732 – 1972, one individual cannot investigate another individual,
unless he is qualified and licensed by law, and no other individual can perform actions of
sleuthing, tracking, or eavesdropping illegally. The taking of testimony and investigating by
any individual who is not licensed is also illegal and inadmissible evidence, and therefore,
the procedure prescribed by the insurance company is in line with the provisions of law.
However, since, as a result of this procedure, under the circumstances whereby the insured
refuses to cooperate, the insurance company is precluded from clearing the claim, for better
or for worse – it is prejudicing the rights of the insureds, extends the duration of the claim
clarification beyond a reasonable length of time, places an impossible burden on the insureds,
since they cannot file a claim at court to exercise their rights, and “eats up” all the time left
in the claim until inception of the statute of limitations.
The insurance company’s demand for cooperation on the part of insured pursuant to Section
23(b) of the Insurance Contract Law is conditional upon the insurance company conducting
itself in the accepted fashion and with bona fides in the performance of its obligations pursuant
to the contract, and is conditional upon these demands, and the company’s procedures,
passing the test of reasonability.
If the insured refuses to be interrogated by the investigator on the insurance company’s behalf,
and by doing so, is breaching the provisions of Section 23(b) of the Insurance Contract Law,
which imposes upon him the obligation to cooperate with the insurer – this does not justify
the insurance company’s action, when it did not clear the claim on time, this, because the
provisions of Section 24 of the law specify the consequences of breach of this obligation,
sine qua non. These provisions, per se, do not exempt the insurer from liability, but rather
confer upon it, at the most, under particular circumstances, the right to reduce its liability,
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Public Appeals
after the insurer shall prove that substantive damage has been caused due to the breach of
this obligation.
If these are the results of operation of the procedure that the company instituted – then we
cannot accept the manner by which claims are cleared, which are based on a procedure that
causes an impossible burden on the insured, contravenes the provisions of the law regarding
the timeframe during which the insurance company must clarify the claim after the insured
furnished it with all the documents that the company required for the purpose of clarifying
the complaint, and are tainted with a lack of fairness, since extension of the handling time of
the insured’s claim, due to this procedure, “eats up” all the insured’s time prescribed by law
until inception of the statute of limitations on his claim.
16. Fair disclosure in a deed of waiver of payment of insurance benefits in a policy
containing a reinstatement clause
In homeowners’ insurance policies, which include a reinstatement clause, the insured has
a right to reinstate his damages within the period specified in the policy. If the insured did
not submit a claim for reinstatement of his damages, then the insurance company that is
paying the insurance benefits by check (stamped on the back with a “waiver of future claims
acknowledgement”) must attach a side letter containing proper disclosure to the insured
about his right to claim the balance of insurance benefits if he reinstates his damages, and
about the expiration date of the insured’s right to reinstate his damages.
Even if, according to the insurance company’s line of reasoning, the letter of acceptance
signed by the insured against payment of benefits calculated according to the real
compensation should be deemed as a deed of final settlement, as long as the insured has not
issued reinstatement evidence, it is advisable that the company issue proper disclosure and
inform the insured in the deed that, if the insured will issue evidence for reinstatement, the
company will pay the difference due the insured pursuant to the terms of the policy.
17. Definition of an insurance event with respect to collections of deductibles
A car hit a tree. The driver then backed up, flipped over and hit another vehicle. The insurance
company claimed that at issue are two insurance events, entitling it to collect a double
deductible.
Pursuant to the provisions of the standard policy, charging an insured to pay a deductible
derives from the following factors: how many claims are at issue, and what types of damage
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Motor Vehicle Insurance – Comprehensive
Annual Report 2004
The Capital Market, Insurance and Saving Division
were caused under the particular circumstances.
It was ruled that the insurance company is entitled to collect one deductible if a number of
losses occurred, but caused in a domino effect, as a consequence of the previous event, and
one claim was filed, regardless of whether one damage point or a number of damage points
were caused to the vehicle. This fact, per se, cannot determine that at issue are two insurance
events. In another instance, the company may deem the claim a “batch of claims” and deduct
a deductible in respect of each of the claims in a “batch of claims.”
In order to ascertain whether at issue is one claim or multiple claims, each instance must
be examined on its own merits. Under these circumstances it is possible to examine, inter
alia, the contiguity of the events, the environmental connection between the events, the
suddenness of the event, whether or not the injuries and damage points originated from the
same source, whether there was a contributory outside factor, the mental state of the driver,
the proximity to the location of the event and more.
It is incumbent upon the insurance company to bear the burden of showing that it investigated
the claim with bona fides, and all the circumstances of the event, before it charges the insured
a double deductible.
18. Insurer’s liabilities towards third parties when the insured does not cooperate with
the insurer
An insured did not notify the insurance company about an accident during which damage
was caused to a third party, and the insurer did not succeed in locating the third party and
obtaining his version of the insurance event. The insurer rejected the claim on the grounds of
a lack of cooperation on the part of the insured.
It was ruled that if the insured – the party to blame for the accident – did not notify his
insurance company about the insurance event, the insurance company is not under any
immediate, unconditional and unlimited obligation to pay the third party the claimed damages.
However, even lacking cooperation or any notice from the insured about the insurance event,
the insurer is obligated to investigate the claim by itself, in a manner that would enable it to
clarify it liability, when a claim is submitted to it by a third party. The insurer must perform
this duty with bona fides and clarify the claim, or at least show that it made earnest efforts
to clarify its liability, such as by sending a registered letter to the insured according to the
address in its records. In the case we examined, it was proven that the insurance company
had sent a registered letter to its insured, after having sent a letter by ordinary post in order to
obtain the insured’s response. When the company received no reply, the insurance company
was obligated to clarify the claim according to that alleged in the third party’s claim. In such
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instance, the insurance company is entitled to reject the claim or to reduce the sum claimed
by the third party, if it possesses suitable, justifiable arguments. In any case, one cannot say
that the insurance company loses its contractual rights pursuant to the insurance contract
or vis-à-vis the injured party directly ­– such as if it did not reduce its damages after the
insurance event occurred, or if there was negligence in the insured’s conduct that contributed
to the occurrence of the insurance event– only due to the fact that the insured did not reply
to the insurance company’s letter.
A multiple-course procedure was formulated that the insurance company must follow in the
event that a third-party claim is submitted:
First course of action: the insurer must write to the insured, upon submission of a claim from
a third-party, and attach documents according to which the claim may be clarified, and notify
the insured that if he does not object to payment of the claim within 30 days, then, after
having clarified its liability, to the extent possible according to the documents and evidence
that the third party produced, the insurer is likely to pay the sum that it shall deem correct
directly to the third party.
The second course of action splits into two alternate procedures:
First procedure – if the insured notified the insurance company that he does not object to
the payment of the third-party claim, then the insurer must clarify its liability, and, upon
completion of its investigation, notify the third party of its position regarding the claim.
The alternate procedure – if the insured does not cooperate with the insurer, and did not, from
the outset, give notice about the insurance event, or does not reply to the insurer’s letters
regarding his objection/consent to settlement of the claim by the insurer, then the insurer
must continue to clarify its liability vis-à-vis the third party according to that specified in
the law. In such instance, the insurance company must write to the insured and request his
position.
These courses of action, of course, are in addition to the procedure to be implemented when
the insured does cooperate with the insurance company, but claims that he is not to blame
and objects to payment of the claim. In these instances, the standard policy prescribes that
the insurer has the right to assume the handling of the claim itself, and to clear the claim
opposite the third party, after so notifying the insured.
The insurance company advised that, in the future, it will conform to our ruling, and will
accordingly amend the wording of the letter to be sent from now on to third parties in cases
when the insured does not cooperate.
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Public Appeals
Annual Report 2004
The Capital Market, Insurance and Saving Division
Implementation of the appraisal arrangement in motor vehicle
insurance [property] – Insurance Circular 2002/7
A number of complaints were received by the Public Appeals Unit regarding implementation
of the appraisers’ arrangement in motor vehicle insurance (property), and following our
investigation of the complaints, we gave the following instructions to the complainee
insurance companies:
19. Insurance companies must be diligent about notifying the insured of his right to
choose the appraiser
Following a complaint that showed that an insurance company sent an appraiser that it
selected, who arrived at the garage before the appraiser sent by the insurance agency, upon
delivery of the notification of the insurance event to the appraisal center.
It was ruled that both the insurance company and the insurance agency acted in violation of
the circular’s instructions, by not notifying the insured of his right to select the appraiser by
himself from the list published by the insurance company, or any other appraiser.
20. The insurance company must deliver the repair quote as soon as possible to the
insured, and the proposal must be legible, clear and understandable
Pursuant to the provisions of Section 6(b) of Insurance Circular 2002/7, the insurer must
deliver all repair quotes to the insured that the insurer received, before the vehicle is repaired.
The provisions of Sections 2(b) and 2(c) convey how important it is that the insured receive
the repair quote from the garage and the final appraisal, so that he will be able to exercise the
possibilities of appeal that are available to him, both with respect to the repair quote and the
final appraisal, once the repair is completed. The insurance company claimed that the repair
quote was retained by the garage “for the insured too.”
It was ruled that since the circular specified the obligation of delivering the repair quote to
the insured, the insurance company must make sure that this quote indeed was delivered as
soon as possible to the insured, before beginning to repair the vehicle. The company may do
this through the appraiser. Since, in this case, the insurance company did not verify delivery
of the repair quote to the insured before performing the repair, it was ruled that the insurance
company was in violation of the circular’s instructions, because, as a result, the insured
was not given the opportunity to object to the quote. The insurance company may deliver
the repair quote in any reasonable fashion, such as by facsimile or e-mail, and it would be
befitting of the insurance company not to burden the insured with the nuisance of having
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Public Appeals
21. The insurance company is not entitled to request invoices from the repair garage
for the purchase of parts for repairing the vehicle before the Elementary Insurance
Department’s consent has been obtained
A third party submitted a claim against an insurance company, and supported his claim with
an appraiser’s opinion on the damages caused to the third party. This opinion determined,
inter alia, that the decorative trim on the door, which was damaged as a result of the accident,
must be replaced. The insurance company accepted every appraisal determined by the
appraiser, except for the matter of the decorative trim. The insurance company did not submit
a counter appraisal in this regard via a counter opinion, in accordance with the provisions
of the Appraisers’ Circular. Instead, the company requested that the claimant furnish it with
a tax invoice from the garage that replaced the decorative trim, which confirms that the
garage purchased the decorative trim. Moreover, the insurance company stated that, when it
receives the invoice it will decide whether to pay and, if so, how much it would pay for the
decorative trim.
We ruled that the result of such an action by the insurance company, notwithstanding the
fact that the need for replacement of the decorative trim was determined in the appraiser’s
opinion that the third party issued to the company, is in violation of Appraisers’ Circular
2002/7 of the Commissioner of Insurance, for the following reasons:
The company should have offered a payment to the insured that is not under dispute, and, if,
indeed, the company wishes to compromise with the claimant, so that the insured does not
have to go to court to exercise his rights, the insurance company should have sent notification
at the same time regarding payment of the insurance benefits that are not under dispute, that
if the insured furnishes the invoices as the company required, and these do not convince the
insurance company to pay him the balance of his disputed claim, then the insured is entitled
to refer to the court to exercise his rights.
It was also clarified to the insurance company that it must not make the continued handling
of a claim contingent upon the furnishing of these invoices, if the insured refuses or disagrees
with this request, and that at issue is a procedure to be used only under exceptional and
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to travel to the garage where the vehicle is located in order to obtain the repair quote. We
also ruled that the insurance company should refrain from delivering a repair quote that is
not written legibly. The insurance company should ensure that the repair quote is clear and
understandable, in order not to obstruct the insured from being able to reach an informed
decision whether he should appeal the appraisal that was issued, both at the repair quote
stage and at the final appraisal stage.
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The Capital Market, Insurance and Saving Division
extraordinary instances, and not as a routine procedure. Therefore, we demanded that the
insurance company change the wording of its letter to the claimant so as to include an
explanation of his right that his claim not be rejected until after the issuance of a counter
opinion on the company’s behalf and after rejection of the claim by a deciding appraiser, and
that solely an appraiser of the company, and not a claims clerk, will decide whether a portion
of the insured’s claim should not be paid without the furnishing of such invoices.
When the complaint was resolved, the insurance company forwarded a draft form to us,
which will be forwarded to claimants, in accordance with prescribed complaint handling
procedures that conform to our demands.
22. An insurance company must contact an external appraiser, who gave an uncomplete
appraisal, and request that it be completed
During investigation of a complaint it became clear that the external appraiser
submitted an incomplete appraisal, since it contained no reference to the
devaluation component in relation to the vehicle’s insurance history.
It was ruled that the insurance company must contact the appraiser immediately and ask
him to complete his appraisal, and must not complete the clarification by referring to other
external appraisers. As long as the company does not contact the external appraiser to ask him
to complete his appraisal, the company, in effect, is prejudicing the insured’s right, which is
anchored in the Commissioner of Insurance’s circular, to receive the external appraiser’s full
appraisal. A minori ad majus, when the insurance company contacts the external appraiser
to complete his incomplete appraisal, it must forward the supplementary appraisal that it
receives to the insured for his perusal.
Insurance for Travel Abroad
23. Fairness in claims clearing – cooperation with the insured – Sections 23-24 of the
Insurance Contract Law
Insureds carrying insurance for travel abroad shortened their trip due to sickness/death of
a family member and submitted a claim to the insurance company for reimbursement of
their expenses, in accordance with the insurance coverage. From examination of complaints
submitted, it became clear that insurance companies are rejecting claims, relying on Section
24 of the Insurance Contract Law, on the alleged grounds that the insureds did not cooperate
with them, because they did not furnish, for example, the waiver of medical confidentiality
form of the family member, or medical records.
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Public Appeals
24. What is the ruling if the request to receive medical records or a waiver of medical
confidentiality is anchored in a request from a physician on behalf of the insurance
company?
Another complaint was submitted by an insured who cancelled her trip because of her
husband’s illness. The insured objected to the insurance company’s right to demand that
her husband, who was not an insured pursuant to the policy, sign a waiver of medical
confidentiality. We point out that the law prescribes that the insurance company’s demand
to receive any document that it requires in order to clarify the claim is subject to the test of
reasonability.
We did not find the insurance company’s demand to receive a waiver of medical
confidentiality form signed by the complainant’s husband to be an unreasonable demand
requiring our intervention, particularly when this demand is supported by the opinion of the
medical specialist on the company’s behalf, who asked to determine his position based on
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Our position is that the insurance company is entitled to request that the insured furnish it
with medical records or the waiver of medical confidentiality form of the family member.
However, the insurance company is not entitled to reject such a claim solely because these
documents were not furnished to it.
Section 23(b) of the law prescribes that the insured must do everything in his power to obtain
the documents, but does not actually impose on the insured an obligation to furnish them.
The insurance company is entitled to verify if the insured indeed did everything in his power
to furnish the documents.
We ruled that if the company believes that the insured is not cooperating with it, and is in
breach of the provisions of Section 23(b) of the Insurance Contract Law, then the remedies
prescribed in Section 24 of the law are available to the company, and in any case, it must
determine its position relying on the information that it possesses.
As long as the insurance company has not borne this burden, then the provisions of Section
24 of the Insurance Contract Law, 5841 – 1981 are applicable to it, pursuant whereto,
the company may also at times be liable for the payment of reduced insurance benefits,
depending upon the particular circumstances of each case. The insurance company is entitled
to full exemption from payment of the insurance benefits only if it has borne all the burdens
prescribed in the provisions of Section 24, or if another cause exists pursuant to the policy or
the law, which entitles it to such an exemption. The mere fact that it is lacking documents, at
the time it is clarifying its liability, does not confer upon the company an exemption from its
liability to pay the insurance benefits.
Annual Report 2004
The Capital Market, Insurance and Saving Division
the medical records that are relevant to the case. An insured who wants to exercise his right
to receive insurance benefits due to cancellation of a trip abroad, which was caused due to
the sudden deterioration in the state of health of a family member, can be required to furnish
the insurance company with the waiver of medical confidentiality form of that same family
member, and this, especially if the insured was prepared to furnish, at his initiative, other
medical records that support his claim.
25. Scope of baggage insurance in travel insurance
In a claim in respect of lost baggage that an insured submitted, the insurance company
notified the insured that it is paying the claim partially, claiming that wear and tear must be
deducted from the items listed in the submitted claim.
After investigating the complaint, we ruled that the insurance company is entitled to deduct
wear and tear from the value of the insured items. However, we found that partial payment
was remitted with respect to some of the items, not because of a deduction for wear and tear
particularly, but rather using the argument that the claim had not been fully proven.
We ruled that if the insurance company is lacking details for the purpose of investigating
the claim, it must so notify the insured, and not arbitrarily reduce the sum of the claimed
insurance benefits.
We further ruled that the insurance company must explain to the insured about how insurance
benefits are calculated, before accepting his insurance application, and, after the insurance
event has occurred, the company must explain to him how it determines the rate of wear and
tear.
Health Insurance
Many appeals were received by the Public Appeals Unit in the health insurance line, and
therefore, we report below on the principles by which the complaints in this sector were
examined.
26. Rejection of claims due to a pre-existing medical condition
The insurance company rejected health claims by alleging that the medical conditions of
the insureds, prior to their joining the insurance, were what led to the occurrence of the
insurance events.
We ruled:
When, prior to accepting the insurance applications, the insurance company had instituted
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Public Appeals
27. Exclusions in an insurance policy, underwriting methods in an insurance proposal,
and in a declaration of health form
The insurance company refused to pay long-term care insurance benefits to an insured, who
had suffered the insurance event, with the argument that there is a general exclusion in the
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some course of action to avoid accepting applicants to the insurance plan whom, in light
of their medical condition, the company would not be interested in insuring, or when the
company added exclusion clauses to the insurance coverage – we found that there was no
concern about a lack of bona fides on the part of the insured, or that his level of functioning,
prior to joining the insurance plan, had deteriorated to the point that it could almost be
classified as insurance event:
With respect to insurance policies in which the insurance benefits were determined according
to a pre-agreed rate, and three years had elapsed between the date of joining the insurance
plan and the date on which the insurance event had occurred, the insurance company is
required to pay the insurance benefits in full, with the addition of linkage differentials and
interest, and this, pursuant to the provisions of Section 43 of the Insurance Contract Law,
5741 – 1981 (hereinafter: “the Insurance Contract Law”), which apply to health insurance
policies, pursuant to the provisions of Section 54(a) of the Insurance Contract Law.
When there was a factual dispute only with respect to the causal connection between the
pre-existing medical condition of the insured and his medical condition upon occurrence of
the insurance event, and we were not provided with any evidence, such as a medical opinion
prepared on the insurance company’s behalf, prior to clearing the insured’s claim, about
the existence, prima facie, of any causal connection as stated, we instructed that a medical
expert be appointed:
When, pursuant to his opinion, an unequivocal medical causal connection was not found, we
instructed that the insurance benefits must be paid.
If the findings of the medical expert were not conclusive, our position was that the insurance
company had performed its obligations regarding fairness in clearing the claim, and therefore
we did not intervene in the insurance company’s decision. The complainant was advised that
he must continue the handling of his case in court, or via a mutually agreed arbitrator or
mediator.
In cases whereby, prior to accepting the insurance applications, the insurance company had
not instituted any course of action to avoid accepting applicants to the insurance plan whom,
in light of their current medical condition, the company would not be interested in insuring,
we examined each case on its merits.
Annual Report 2004
The Capital Market, Insurance and Saving Division
policy regarding denial of insurance benefits due to a pre-existing medical condition.
A number of irregularities were found in the insurance company’s actions: the exclusion
had not been emphasized as required by law; there had not been proper disclosure of this
exclusion in the insurance proposal prior to accepting the insured’s application; no question
about the pre-existing medical condition had been included in the declaration of health form,
in respect whereof the claim had been rejected.
We ruled that the insurance company’s actions were tantamount to performing underwriting
at the time that the insurance event occurred, and that the insurance company had created a
representation to the insured that his condition did not have any implications on the validity
of the insurance contract, since the company had not asked him questions in this regard at the
time the insured had applied for the insurance, and that there is a concern about a breach of
the duty of bona fides on the part of the insurance company during the contract negotiations,
which is in violation of the provisions of Section 12 of the Contract Law. Even if an exclusion
regarding a pre-existing condition may be applied, it was ruled that, by not placing a time
limit on its validity, it causes a situation whereby an insured, who purchases an insurance
contract, is not entirely eliminating the risk that is hanging over him, and remains unclear as
to the division of risks between him and the insurance company.
We instructed the insurance company to pay the full insurance benefits to the insured.
28. Extent of an insured’s obligation to provide fair disclosure
The company rejected the claim using the argument that the insured breached her obligation
to provide fair disclosure, and did not disclose facts about her medical condition, that she
walked using a cane, and that she receives a long-term care pension from the National
Insurance Institute – and therefore, refused to pay insurance benefits to the insured.
The insurance company did not prove that the fact that it discovered has an impact on the
medical condition that caused the long-term care condition, and did not inform the insured
that she is obligated to report a change in her medical condition during the qualification period.
Therefore, even if the insured received a long-term care pension from the National Insurance
Institute, the insurance company is obligated to check the National Insurance Institute’s
functional assessment of the insured, and to prove that the use of the cane was necessary for
her to be able to walk, and did not serve, perhaps, merely to prevent her from falling.
29. The obligation to furnish a medical opinion to an insured under health insurance
when the insured’s claim is rejected
An insurance company rejected a claim for long-term care, on the grounds that the medical
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Public Appeals
condition was caused as a result of an illness that the insured suffered during the qualification
period.
It was found that the insurance company had prepared the medical opinion for basing its
rejection of the claim in a manner that was deficient. We ruled that an insured under health
insurance, whose claim was rejected by an insurance company, is entitled to receive the
reasoned and detailed medical opinion from the insurance company, on which the company
relied when it rejected the claim. The opinion must specify the medical records according
to which the opinion’s findings were determined, as well as the full name of the physician
who wrote the opinion. The preparation of a medical opinion as stated is required so that the
insured, whose claim was entirely or partially rejected, is able to plan his next steps vis-à-vis
the insurance company, and, should he wish to submit a claim, he will be able to submit the
opinion in support of his claim.
Therefore, we instructed the insurance company to revise the work procedures in the
company.
31. An insurance company’s right to cancel insurance due to information that the
insurance company already possessed at the time it was discovered
The insurance company claimed that the insured was not entitled to be insured in the insurance
plan that she had joined, and which had been an insurance plan offered to those who were
insured in the previous insurance plan, due to her pre-existing medical condition.
29
Annual Report 2004
30. An insurance company must verify the insured’s medical condition that is relevant
for the type of insurance he is purchasing
Following investigation of a complaint in relation to long-term care insurance, we ruled that
an insurance company must verify the medical condition of an insured that is relevant to the
type of insurance that the applicant is applying to purchase. The insurance company must
ask the insurance applicant clear questions in this regard, in order not to thwart him later with
a claim of a lack of fair disclosure in this regard.
Therefore, the insurance company must ask the insured if he is receiving a long-term care
pension from the National Insurance Institute, or if he received compensation for his longterm care needs from another source, and the company must not make do with questions
regarding his functional capabilities. This information is relevant for the type of insurance
that the applicant is requesting to purchase, particularly when at issue is a person joining
the insurance plan in his later years, which vests him with a right to submit a claim to the
National Insurance Institute in respect of a long-term care pension.
Annual Report 2004
The Capital Market, Insurance and Saving Division
It turned out that the insured had declared her pre-existing medical condition in the previous
insurance plan, and had been insured under the previous plan, with an exclusion for this
medical condition.
It was ruled that since the insurance company had not made use of medical information
that was in its possession, in the previous insurance plan, and had not rejected the insured’s
application to join the new insurance plan, the insurance company cannot cancel the insurance
in the new insurance plan, and particularly not when a claim has been submitted.
We instructed the insurance company to reinstate the insured in the new insurance plan and
to revise its work procedures in this regard.
32. An insurance company’s right to cancel a health insurance contract due to a failure
to provide fair disclosure on the part of the insured
The insurance company cancelled the insured’s long-term care insurance, due to information
that it received during the period of insurance relating to the insured’s medical condition
before she joined the insurance plan, when the company had not required a declaration of
health from the insured at the time she joined the insurance plan. The insurance company
refunded the premiums that it had collected from the insured during the period of insurance
to the insured’s account.
It was ruled that when there was no requirement for a declaration of health at the time of
joining the insurance, the insurance company can cancel the health insurance contract due
to information about a pre-existing medical condition that reached the company during the
period of insurance only if it will prove that the insured had concealed this information with
fraudulent intent at the time she joined the insurance plan.
It was further ruled that the cancellation notice must be sent within 30 days of the date that
the information was received, in accordance with Section 7(a) of the Insurance Contract
Law.
Under the circumstances of this case, the insurance company did not claim concealment with
fraudulent intent, and did not even bring any evidence of this. Furthermore, the documents
in the complaint file show that the cancellation was effected more than 30 days after the
information was received.
It was further ruled that there were irregularities in the manner by which the notification
of cancellation of the policy was given to the insured, which was done by returning the
premiums to the insured’s account, without given her advance notice of this, and without
giving any explanation whatsoever of the manner by which the returned premiums had been
calculated.
30
Annual Report 2004
Public Appeals
Therefore, we instructed the insurance company not to cancel the insurance, to revise its
procedures regarding the method of giving notice of cancellation of policies, and to refrain
from cancelling policies by way of returning premiums in the future.
33. In relation to long-term care insurance, what will be deemed as functional
dependency, when it is tantamount to an occurrence of an insurance event
The insurance company rejected a claim under long-term care insurance using the argument
that the insurance event occurred before the insured joined the insurance.
According to the principles for investigating claims under long-term care insurance, it was
ruled that a claim can be rejected if the insured’s functional ability had deteriorated to the
point that it was almost tantamount to an occurrence of an insurance event. Due to rejection
of the claim, we contacted the insurance company again and clarified to the company that
only when the long-term care disability concerns mobility (such as a person confined to a
wheelchair) and incontinence, will the insured’s condition be deemed to be approximating
an occurrence of the insurance event. Under the circumstances of the case at issue, there had
been a slight handicap in dressing and eating.
The insurance company accepted our position and paid the insurance benefits in full.
31
Annual Report 2004
34. An insurance company’s right to discontinue the payment of insurance benefits
under health insurance policies
The insurance company stopped paying insurance benefits to an insured under long-term
care insurance three months after beginning the payments, using the argument that it is
possible that a change occurred in the insured’s state of health, and that it had notified the
insured in advance about discontinuation of the payments.
We ruled that the insurance company is not entitled to pre-determine when clearing a claim,
that in the policy that is the subject of the complaint, the insurance benefits will be paid for
a limited period, since the company cannot know in advance when the insured will cease to
be in a condition needing long-term care. If the insurance company believes that a change in
the insured’s health condition is likely to occur, which might have an affect on the insured’s
entitlement to insurance benefits, the company is entitled to re-examine the insured’s medical
condition during the period in which it is paying the insurance benefits, and to re-examine
its liability vis-à-vis the insured.
Annual Report 2004
The Capital Market, Insurance and Saving Division
35. Failure to clearly specify the causes for rejection under health insurance
It was ruled that if rejection of an insured’s claim is due to breach of the insured’s fair
disclosure obligation, the insurance company’s argument cannot be accepted that it cannot
specify such a cause in the rejection letter. Furthermore, the insurance company cannot
base such an argument on nondisclosure of medical circumstances, if the company had not
asked explicit questions in this regard. Moreover, the insured cannot be required to declare
the existence of an illness, when such illness had not been diagnosed before the insurance
contract was signed.
Under the circumstances of this case, it was ruled that the insured had not been obligated
to declare Alzheimer’s Disease only on account of the fact that he had some memory loss,
when he had not been expressly asked if he is suffering from any loss of memory. Thus, it
was ruled that the insured does not have to declare the occurrence of a stroke, if no diagnosis
in this regard had been made, even if they were determined in the findings of a CT test,
and even if a physician on behalf of the company can draw medical conclusions from these
findings, if no medical record contains a diagnosis that the insured had a stroke.
36. Is it compulsory for an insurance company to send an insured for a medical
examination in order to avoid “loss of evidence”?
According to a work disability policy, the insurance company is obligated to pay insurance
benefits in the event of a stroke, only if it is accompanied by destruction of brain tissue and
constant, consecutive neurological deficiency continuing more than 12 weeks. Pursuant to
the policy, the insurance company is entitled to conduct any investigation at its expense and
to examine the insured by one or more physicians on its behalf within a period of 90 days of
the date that all required documents have been furnished to the company.
The insured claimed that, despite the fact that she had furnished the documents to the
insurance company immediately upon her discharge from the hospital, she was examined
by the physician on behalf of the company only after 12 weeks had elapsed. As a result,
the insured “lost” evidence, since at this time she could no longer prove the neurological
deficiency that she had had, which is a condition for receiving the insurance benefits.
It was ruled that the insurance company must act with all due speed to clarify its liability,
at the time that a claim is submitted by the insured. However, the insured has the obligation
to prove that he is suffering from a medical condition that entitles him to the payment of
insurance benefits, at least by the deadline specified in the policy, and, in this case, by the
end of ninety days, which must be counted only after the 12 weeks prescribed as a criterion
for the neurological deficiency to be deemed “consecutive and constant.
32
Annual Report 2004
Public Appeals
Since the insurance company examined the insured within the said 90-day period, it did not
prejudice the insured’s rights. The complaint was not found to be justified and therefore, the
insurance company was not obligated to pay the insurance benefits.
37. Does any breach of the policy conditions by the insured completely deprive him of
his entitlement to insurance benefits?
An insured under dental insurance needed dental treatment, but did not request approval
in advance from the insurance company in accordance with the conditions specified in the
insurance policy. At first, the insurance company refused to pay her insurance benefits, but,
in the final analysis, agreed with us that is not sufficient that the insured did not request
approval in advance for undergoing the treatment in order to reject the claim, and that, at the
most, the company has the rights pursuant to Sections 24-25 of the Insurance Contract Law;
i.e., only if the insurance company can show that it was caused consequential damage, will
it be entitled, accordingly, to pay reduced insurance benefits.
38. Cancellation of a long-term care insurance policy
Long-term care insurance was cancelled due to a failure to pay premiums, and the complainant
appealed to us with a complaint on behalf of his mother. The insurance company explained
its right to cancel the policy because the payment of the premium was in arrears and because
the express consent of the insured had not been given to continue the collection.
It was ruled that, unlike in property insurance policies, which are renewed annually, and
for which the insurer must obtain express consent, the provisions of life insurance apply
similarly to the matter of long-term care insurance, on which the provisions of Section C of
the Insurance Contract Law, 5741 – 1981 apply, regarding illness, accident and disability.
Pursuant to the provisions of Section 54(a), regarding the payment of pre-agreed compensation
benefits, all the provisions of Section B apply, mutatis mutandis. Pursuant to the provisions
of Section 45 of the law in Section B, in a long-term care insurance contract, only the insured
has the right to cancel the insurance contract.
39. Is an insurer entitled to clear a directors’ insurance contract at the request of an
employer?
It was ruled that the insurer did not act lawfully when it cleared a directors’ insurance policy
at the request of an employer, and this, without having checked whether any amendment
33
Annual Report 2004
Life Insurance
Annual Report 2004
The Capital Market, Insurance and Saving Division
was made in the employee’s employment contract. Clearing of a directors’ insurance policy
in any case results in non-allocation of a premium in respect of the policy. Failure to pay
a premium is likely to constitute a debt in arrears, pursuant to Section 19.a. of the Wage
Protection Law, 5718 – 1958. Therefore, the insurer must verify, before clearing, that at
issue is not a unilateral action by the employer, but rather an action deriving from a change
in the terms of the employee’s contract or from another change made with the consent of the
insured employee.
40. The right of an insured to a refund of premiums when the insurance company had
been misleading
In a life insurance policy, an insured was misled to believe that the policy promises a grant,
while it became clear that the “grant” that was promised by the insurance agent (“BarMitzvah Grant”) was none other than the opening of another policy (pure savings) that was
paid from out of the current allocations of the insured.
It was ruled that the term “grant” implies a promise of payment to be rendered by the
insurer outside the framework of the insured’s allocations. A sum being paid by virtue of the
insured’s allocations alone cannot be deemed to be a “grant.” It is not possible to equate the
undertaking implied in the promise that a grant would be given, with a sum of savings that
accrued in the policy, which derives entirely from the consecutive monthly deposits of the
insured.
Therefore, the insurance company was obligated to return the premiums to the insured that
he had paid for life insurance, since the insured had been misled by the company.
Personal Accident Insurance
41. Misleading of insureds in a personal accident insurance transaction – accidental
death
A personal accident policy for accidental death was purchased via a telephone transaction,
after the telemarketer had suggested to an insured, who had purchased car insurance, to join
this insurance plan, and to insure his wife as well. The insured was a police officer, who had
retired from the service, while his wife still served in the police department in a desk job. During a chase after a motorcycle rider who was suspected of being a terrorist, to which
she was asked to join, the police officer was injured by the motorcycle and was killed. The
insurance company refused to pay the insurance benefits, using the argument that, pursuant
to the policy provisions, the company is exempt from its liability if the death was caused
34
Annual Report 2004
Public Appeals
while the insured participated in a combat, military or police operation.
It was ruled that the insurance company did not fulfill its obligation of fair disclosure vis-àvis the insured, since it did not disclose to him the exception to the insurance coverage, while
the insured had fulfilled its obligation vis-à-vis the insurance company, since he had stated,
in answer to the questions asked, that his wife works at the police department. Therefore, the
insurance company was in breach of the provisions of Section 55 of the Control Law, which
prohibits the misleading of an insured in a material matter during an insurance transaction.
This breach was committed by the insurance company, since it did not present to the insured
the exceptions to the insurance coverage that it had offered to him, and this, during the stage
that the insurance contract was being contracted. The purpose of this section is to prevent
such a result, whereby an insured purchases insurance that, from the outset, cannot provide
him with any coverage, due to the exception specified in the insurance policy. Therefore, we
obligated the insurance company to pay the full insurance benefits pursuant to the policy to
the insured’s survivors.
When we learned that the insurance company does not make it a practice to specify the
exclusions and restrictions during the sales pitch, in the personal accident insurance policy,
or in any other policy that it sells, we deemed it fit to instruct the company to revise its
procedure for selling the policy and to notify the insureds about the exceptions to the
insurance coverage. The insurance company notified us that it corrected the irregularities
that we indicated, and that it will comply with our instructions.
43. Must the approval of the Commissioner of Insurance be obtained for an insurance
policy, including a collective insurance policy?
Regarding a complaint submitted on the matter of municipal employees, for whom the
insurance company drew up a group insurance policy for personal accidents, it became evident
35
Annual Report 2004
42. Is an insured entitled to a refund of premiums under work disability insurance
when his wage has been reduced?
It was ruled that, when an insured’s wage has been reduced, he must so notify the insurance
company. If the insured did not so notify the insurance company, notwithstanding the fact
that the insurance sum for which the insurance company might become liable upon the
occurrence of an insurance event also diminished, the insurance company is not obligated to
refund to the insured the difference in the premiums as a result of such reduction, since it was
the insured who did not report this fact, and it was the insured who did not request to adjust
the premium to the reduction in his wage.
Annual Report 2004
The Capital Market, Insurance and Saving Division
that the policy had not been submitted for approval by the Commissioner of Insurance. The
insurance company claimed that the policy is exclusively for personal accident insurance
and that it was drawn up especially for the employees of the municipality, and that, since
this is not an “insurance plan,” the insurance company is not obligated to obtain approval
in advance from the Commissioner of Insurance, prior to the marketing thereof. Therefore,
from its standpoint, when it made an amendment in the insurance policy, whereby it added
an exclusion to an insurance event, the exclusion was applicable to the insureds who had
purchased the insurance. At issue was the exclusion of road accidents from an insurance
event under personal accident insurance.
After checking with the professional departments in our division, we learned that the
insurance company had not notified us from the outset about the insurance policy that is
the subject of the complaint, and had not received a permit before instituting it. Pursuant
to Section 40(b) of the Insurance Business (Control) Law, an insurer is prohibited from
instituting an insurance plan for which a permit has not been given by the Commissioner, and,
pursuant to the Insurance Business Control Order (New Insurance Plans and Amendments
to Plans), 5742 – 1981, this insurance policy is a policy that falls under the definition of a
plan according to the said Order, and therefore, it must not be marketed without obtaining a
permit. Therefore, since a permit had not been given in the first place, the amendment made
therein cannot apply to the insureds.
In light of all that stated above, we ruled that the complaint was justified, and we instructed
the insurance company to pay the insurance benefits to the insured that are due to him in
accordance with the policy, notwithstanding the fact that the insurance event occurred due to
a road accident. We also notified the insurance company that it cannot operate in accordance
with the policy that is the subject of the complaint without receiving a permit from the
Commissioner of Insurance, and that the company must bring the insurance plan for the
approval of the Commissioner within 60 days of receiving this decision. Therefore, we
instructed the insurance company to pay insurance benefits to the insured pursuant to the
policy that had been in effect prior to the amendment that it made.
The insurance company filed an appeal with the District Court of this decision, pursuant to
its authority pursuant to Section 102 of the Control Law. The appeal of our decision was
rejected.
36
Annual Report 2004
Public Appeals
Insurance Agents
45. The responsibility of an underwriting agency in an insurance transaction for a
representation made by a sub-agent on its behalf - enforcement
An insured paid the premiums for a car insurance policy to the insurance agent, who brokered
an insurance transaction as a sub-agent of an underwriting agency, without the insured
knowing about this, and was asked to give him a check payable to the order of M.E.M.S.I.
for the towing insurance that he added to the insurance policy. A portion of the premium was
paid in cash by the agent. A long time later, the underwriting agency requested that payment
of the premium be completed and even sent him insurance cancellation notices due to the
arrears in payment of the premiums. When the insured contacted the underwriting agency
to find out why he is being requested to pay more money, notwithstanding the fact that he
had paid the entire premium, the underwriting agency referred him to the insurance agent.
The latter calmed the insured and clarified to him that at issue is merely an error. During
the period of insurance an accident occurred, and when the insured tried to activate the
policy, the agent referred him to a garage, which was to handle the accident, and advised
the insured that the insurance company would reimburse him within thirty days. When the
money failed to arrive, the insured contacted the insurance agent to find out why, it turned
out that the insurance agent had encountered financial difficulties, had embezzled insureds’
monies, and had committed suicide. The insurance company refused to pay the insurance
benefits to the insured, using the argument that the policy had been cancelled due to arrears
37
Annual Report 2004
44. The duty of insurance agents to inform insureds of all details of the insurance
transaction prior to executing the engagement
Investigation of complaints submitted against insurance agents showed that insurance agents are
not informing their insureds of the details of the insurance transaction prior to contracting it.
Our position is that insurance agents are obligated to inform the insureds of all details of
the insurance transaction, inclusive of the identity of the insurance company with whom the
insurance contract will be contracted, and the insurance premium. The name of the insurance
company with whom the engagement will be made, and the insurance premium are required
in order to fulfill the requirement of specificity when contracting a contract, in accordance
with the general contract laws, and in accordance with Section 55 of the Insurance Business
(Control) Law, 5841 – 1981. It is important to emphasize that a circular is currently being
promulgated which obligates insurance agents to specify the name they were given in their
insurance agent license.
Annual Report 2004
The Capital Market, Insurance and Saving Division
in payment of the premiums, and the argument that the insured knew that the payment to
M.E.M.S.I. was not intended for the company, while it supported these arguments with the
fact that the insured does not possess a tax invoice as required by law from the insurance
agent. The complainant had submitted a complaint against the insurance agent before the
agent had committed suicide. The underwriting agency claimed that the insurance agent is
not its agent, and that he should be deemed the party that had brokered the transaction.
We ruled that the insurance company’s claim of exemption because part of the premium
had been designated for M.E.M.S.I. cannot be accepted, and that a tax invoice cannot be
demanded from the insured as evidence of payment of the premium, since premiums are
not charged V.A.T. in the first place. A claim of mere fraud and deception on the part of the
insured cannot be raised, when he has no possibility of proving the truth, since the insurance
agent committed suicide. The insurance company must lay a foundation of evidence that
would be sufficient to base a claim such as this. We also rejected the insurance agency’s
claim that there are no agency relations between it and the sub-agent and that such relations
apply only between the sub-agent and the insurance company.
Therefore, it was ruled that the insurance agent breached the provisions of Section 30 of the
Control Law. The provisions of the Commissioner’s circular have been instituted recently
in this regard. We view the agency as the party fully responsible for demanding from its
insurance agent to uphold the provisions of the law, and to secure the insureds’ welfare
following the breach of the provisions of the insurance contract and the law. We further
ruled that even if an outstanding balance indeed remained, as the insurance company alleges,
then there was breach of the provisions of Regulation 5 of the Insurance Business (Control)
Regulations (Uniformity of Currencies in Insurance Contracts and Insurance Premiums on
Credit), 5744 – 1984, which obligate the insurer to specify in a single written notice the sums
that were paid by the insured, including sums in cash, and the outstanding balance due, as
well as the interest rates calculated annually.
The complaint was found to be justified, and we instructed the insurance company not to act
on the policy cancellation notice that it had issued, and to pay the complainant the insurance
benefits in respect of the accident that is the subject of the complaint.
38
Annual Report 2004
Public Appeals
Section B.
This section shall present the statistical data on the work of the Public Appeals Unit during
2004, compared to previous years.
Multi-year Trends in the Volume and Scope of Appeals
Comparative data on appeals in all fields in 2004 and in previous years
Table 1
Distribution of Insurance-related Complaints
2003
Number
Complaints opened during the year
2364
2004
Percent Number Percent
100
2383
100
Complaints resolved during the year
3317
100
3254
Distribution of the complaints in which we intervened:
Justified complaints
137
4
182
Unjustified complaints
705
21
503
100
Distribution of the complaints in which we decided not to intervene:
Claims cleared under Exercise of Rights
569
982
30
347
Uncontested claims
529
Complainant accepted the company’s position
732
22
270
Irresolvable complaints
Ended due to a factual dispute
376
11
279
Ended due to matters under adjudication
120
4
36
Complaints outside the Commissioner’s
68
2
84
purview
Closed due to inaction by the complainant
127
4
93
Other
70
2
362
6
15
17
11
16
8
9
1
3
3
11
3. In 2004, the Public Appeals Unit received: 3,331 appeals relating to insurance , but since, in a portion of the
complaints, the complaint was against more than one supervised entity, 3,811 appeals against supervised
entities were recorded., of which: 2,990 were complaints, 549 were queries, and 272 were copies of
complaints. With regard to the complaints, 856 complaints were investigated according to standard
procedure, and 2,134 complaints were investigated according to the Exercise of Rights procedure.
4. Since in 2004, the procedure for handling complaints submitted against companies was changed to
the Exercise of Rights procedure, the categories of the rulings were also changed. From now on, these
categories express the concept that, as long as the insured has not fully exercised his rights vis-à-vis the
insurance company, it is unnecessary to consider whether intervention in the complaint is warranted. See
glossary in Appendix A for an explanation of the terms used in the table.
39
Annual Report 2004
Source: Public Appeals Unit, Capital Market, Insurance and Savings Division
Annual Report 2004
The Capital Market, Insurance and Saving Division
Chart 1
Distribution of Insurance Company Decisions according to the
Exercise of Rights Procedure in 2004
35%
30%
25%
20%
15%
10%
5%
0%
Settled
Rejected
Complainant.
Administrative Closing and
Accepted the Company's Complaints Outside the
Position
Commissioner's Purview
Source: Public Appeals Unit, Capital Market, Insurance and Savings Division
Chart 2
Distribution of Rulings by the Public Appeals Unit on Complaints Rejected
under the Exercise of Rights Procedure in 2004
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Unjustifies Complaints
Justified and Partially
justified Complaints
Complaints Involving a
Factual Dispute
Source: Public Appeals Unit, Capital Market, Insurance and Savings Division
40
Annual Report 2004
Other
Public Appeals
Chart 3
Duration of Handling Time of Complaints Handled According to the
Exercise of Rights Proccedure 2004
5% ,75
26% ,382
6% ,0
30% ,458
1 month.
2 months.
3 months.
4-6 months.
7-9 months.
10-12 months
16% ,231
23% ,336
41
Annual Report 2004
Source: Public Appeals Unit, Capital Market, Insurance and Savings Division
Annual Report 2004
The Capital Market, Insurance and Saving Division
Rating of Insurance Companies according
to Public Complaints Resolved in 2004
The Public Appeals Unit of the Capital Market, Insurance and Savings Division has been
publishing a rating of insurance companies since 1000, based on public complaints that were
resolved. Until 2001, the rating related only to complaints in the motor vehicle insurance
(property) line – comprehensive and third-party insurance. Since 2002, the rating has been
expanded, and now includes four cross-sections: a rating of all insurance lines; a rating of
the life insurance line; a rating of the non-life insurance line; a rating of the motor vehicle
insurance (property) – comprehensive insurance and third-party insurance.
In 2004, we are publishing the rating of insurance companies in two cross-sections only: the
first, being a rating of all insurance lines, while the second is a rating of the health insurance
line. This change was made in light of the similar results obtained in all cross-sections, and
due to the high coefficient between the results of the rating according to premiums that the
companies collected and the rating according to the total claims that were paid. However,
this year, another rating was added, in the health insurance line, due to their prominence
and the substantial number of complaints in this line that were found to be either justified or
partially justified complaints.
As of the beginning of 2004, a new handling procedure has been instituted in the Public
Appeals Unit, whereby complaints against insurance companies are forwarded for handling
directly by the insurance companies. This procedure enables the clarification process to be
completed within the scope of the insurance companies. The insurance companies are thus
able to arrive at an arrangement with the complainant within the timeframe allocated to
it, as a fair opportunity to respond to the complaint, or to furnish the complainant with
clarifications for the company’s adherence to its position.
Included in the rating are complaints that remained unresolved, since the insurance company
notified that it is adamant in its position, while the complainant asked for continued
investigation of his complaint – whether they were found to be justified or partially
justified.
The rating does not include complaints for which the handling thereof was discontinued
since the insurance company reached a settlement with the complainant, or when the
complainant accepted the insurance company’s position and did not refer again to the Unit
for our intervention.
When calculating the rating, complaints found to be justified were given a double
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Annual Report 2004
Public Appeals
weighting compared to complaints found to be partially justified.
The rating was carried out in two stages:
In the first stage, the ratio was calculated between the numbers of justified and partially
justified complaints filed against each company and the gross premiums it collected
(“company ratio”). In addition, a ratio was calculated between the number of complaints of
all companies in that same insurance line cross-section; i.e., the ratio of total complaints found
to be justified and partially justified to the total gross premiums collected by all companies
included in that same insurance line cross-section (“total industry ratio”).
In the second stage, the ratio obtained in the first stage is standardized for the total industry
ratio – i.e., by dividing the company ratio by the total industry ratio. This helped to define
an indicator whose numerical value was set at 1, and enabled the position of each insurance
company to be defined relative to that indicator.
To make reading the table easier, a boldface line has been drawn across the company data in
each table, to mark the location of the indicator whose value is 1 in the rating. Companies
rated lower than 1 are located below this line, while companies rated higher than 1 are found
above this line.
The companies are listed in each table such that companies with a poor rating appear at the
top of the table.
It should be emphasized that this rating contains an element of relativity, since in smaller
companies, the relative effect of a small number of complaints is greater compared to the
relative effect of the same number of complaints on larger companies. This is particularly
evident when the absolute number of complaints is identical but the rating is different. We
were unable to neutralize this effect, so the reader must take this fact into account with
respect to the location of a small company in the rating.
We reiterate that the rating should not be the sole factor one takes into account when
choosing an insurance company. The premium being charged is just as important as
other factors when formulating a decision, such as the service that the company provides
to its insureds, the scope of the various insurance covers, expansion of coverages, and
recommendations of relatives and friends.
43
Annual Report 2004
The lower the number obtained after standardization for each company is than 1 – the
better the company’s rating.
The higher the number obtained after standardization is than 1 – the worse the rating.
Annual Report 2004
The Capital Market, Insurance and Saving Division
Table 2
Rating of Insurance Companies for 2004
All Insurance Lines
Dikla
Shomera
A.I.G.
Phoenix
Shirbit
Eliahu
I.D.I. Direct
Arieh
Harel
Hachsharat Hayeshuv
Hadar
Total Justified and
Partially Justified
Complaints
31
6
8
43
5
13
11
14
57
9
19
Menorah
Clal
Agricultural
Migdal
Ayalon
Hamagen
TOTAL
18
22
1
8
1
0
266
Company
44
Annual Report 2004
Rating
9.340
3.372
2.171
2.056
1.969
1.767
1.603
1.514
1.351
1.162
1.111
1.000
0.753
0.447
0.307
0.166
0.102
0.000
Public Appeals
Table 3
Rating of Insurance Companies for 2004
Health Insurance Line
Company
Total
Justified /Partially
Justified Complaints
Ranking
Phoenix
24
2.386
Hadar
8
1.656
Dikla
31
1.640
Harel
19
0.539
Clal
10
0.435
TOTAL
92
5. Not included in the rating are companies having up to 2 justified or partially justified complaints:
Ayalon, Arieh, Hachsharat Hayeshuv, Hamagen, Migdal and Menorah.
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Annual Report 2004
1.000
Annual Report 2004
The Capital Market, Insurance and Saving Division
Appendix A
Glossary for the Public Appeals Section
Categories of appeals received for handling
A. Appeals
Included in this category are all appeals received at the Unit: complaints, queries and copies
of complaints.
B. Complaints
This category includes only complaints received at the Unit whereby the Commissioner of
Insurance was directly asked by the insured to intervene in a dispute between the complainee
and the insured.
C. Complaints handled according to standard handling procedure
Complaints against parties other than insurance companies, such as insurance agents, pension
funds and provident funds, are handled according to the standard handling procedure, as in
previous years.
This year, also complaints opened in 2003 and resolved during 2004 have been included
under this category.
D. Complaints handled according to the Exercise of Rights procedure – utilizing
procedures in companies
Complaints are being investigated according to a new procedure at the Public Appeals Unit,
whereby complaints against insurance companies are being forwarded for direct handling
by the insurance companies. The companies are required to investigate the complaints and
to respond directly to the complainants, with a copy being forwarded to us (Exercise of
Rights Procedure at companies). Any complainant, who is not satisfied with the company’s
response, is asked to contact us, and we continue investigating the complaint and issue our
ruling.
E. Queries and responses
Included under this category are queries, in which we were asked to respond to general
questions, or questions about insureds’ rights, such as questions relating to provisions of law
or circulars addressing various matters, proposals for changes, and the like. These queries are
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Public Appeals
not forwarded to insurance companies for their comments, and we answer them directly.
F. Copies of complaints
These are insureds’ complaints addressed to the insurance companies, with copies addressed
to the Commissioner of Insurance. We receive these copies and do not forward them to the
companies for their response, except in exceptional cases.
Categories of Rulings on Complaints
A. Justified complaints –
In complaints found to be justified, the supervised entity is required to rectify the irregularity,
usually according to operative instructions given with respect to the specific complainant.
Sometimes, the supervised entity is required to rectify the irregularities found in the complaint
with respect to all insureds in the company. Supervised entities subject to the Insurance
Business (Control) Law, 5741 – 1981, are required to comply with the operative instructions,
unless they have appealed to the District Court, as specified in Section 102 of the aforesaid
law.
B. Unjustified complaints –
This category includes rulings in which it became clear that the supervised entity had acted
in accordance with the law, or in accordance with the circulars of the Commissioner of
Insurance or in accordance with the directives specified within the scope of fundamental
rulings. In these instances, the decision is not binding upon the complainant, and he is entitled
to exercise his rights in court.
C. Complaints resolved through processes at the insurance companies –
Complaints acceded to by insurance companies, as arises from the companies’ responses.
E. Uncontested complaints –
Complaints against insurance agents that are investigated according to standard handling
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Annual Report 2004
D. Partially justified complaints –
This category includes complaints filed against insurance companies and investigated
according to the Exercise of Rights procedure at the companies. In these cases, after the
company did not accede to the complaint, it changed its position after our intervention.
Annual Report 2004
The Capital Market, Insurance and Saving Division
procedure, whereby the agent took it upon himself to accede to the complaint, either in
its entirety or partially, after our intervention, and the insured agreed to this, without the
Commissioner having to issue a binding decision.
F. The complainant accepted the company’s position –
Complaints that were investigated according to procedures at insurance companies, when
the complainant accepted the company’s position, and did not request that we continue to
intervene in the investigation of the complaint.
G. Irresolvable complaints –
This category includes complaints that were closed because no position was taken in the
decision. The category in effect, encompasses a number of sub-categories, because sometimes
it is difficult to precisely classify a complaint under an existing category.
H. Complaints involving a factual dispute –
These are complaints based on versions of the facts, which cannot be resolved without
preferring one version of the facts over the other, due to a lack of sufficient evidence, and no
irregularity has been found in the actions of the company that justifies our intervention. In
complaints of this kind, the complainants are advised to apply to the competent court or to
initiate a process of mediation with the supervised entity.
I. Complaints regarding matters being adjudicated –­
These are cases that are closed by the Unit, when it becomes evident that the matter raised in
them is pending in court (or in arbitration) in adjudication between the complainant and the
complainee, and we found no particular reason to interfere in these proceedings, according
to Section 60(b) of the Insurance Business (Control) Law, 5741 – 1981.
J. Complaints that are outside the Insurance Commissioner’s purview – ­
These complaints are forwarded to the competent authority to handle them. For example:
complaints against financing companies regarding terms of a contract between a company
and the financing recipient (leasing transactions) are forwarded to the Ministry of Industry,
Trade and Labor or to the Ministry of Justice. Complaints regarding the professional work
of motor vehicle appraisers are forwarded to the Ministry of Transportation. Complaints
against banks are forwarded to the Bank of Israel.
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Public Appeals
49
Annual Report 2004
K. Cases that were closed due to inaction by the complainant
These are complaints in which the Unit requested that the complainant produce additional
documents so that it can continue to investigate his complaint, but the complainant failed to
do so, which prevented the Unit from completing its investigation of the complaint.