16 POLICY Special edition 2023 In Mindset to Israeli Life (Insurance) By Giselle Paz, L&H Actuary, Aon Reinsurance Israel The Israeli Life insurance market is an expanding and evolving environment, facing a wide range of complex challenges – some of them of global nature, some unique to the local industry. NEW LIFE. Developing life business is a strategy of grow for general insurance companies. Clearly this diversification generates a new source of profit. It allows efficient risk management, which is translated into capital efficiency through diversification effects under Solvency II. Furthermore, innovative today available technologies became a huge advantage while competing with traditional insurers and heavy legacy, allowing reduced costs at each point of the chain: placing advanced underwriting tools give automated, improved, and faster sales; digital capabilities allow better marketing; data analytics provide a better understanding of trends and performances - as lapses, fraud-control and claim management. Non-life companies would be then able to offer up-sales providing the existing clients with a complementary value. The dynamics may well also push life insurers to invest in forward thinking tools and processes, upgrading the overall industry value. PRODUCT DESIGN. Our life and health market were traditionally known for its creativity and out of the box thinking. The motivation was diversifying sources of revenue by giving value to the insured, with different product designs fitting different publics and needs. With the goal of allowing anyone easily compare and understand policies, the regulator is leading uniform basic coverages, definitions, and structures. Competition on the service level is then brought to front. The standardization approach gives a clear mainstream line of solution, making it simpler also to reinsurers. Still, no one can determine for the consumer what he needs, and a further level might focus on tailor-made solutions to different pockets, preferences, and risk appetites. On this grounds, InsureTech startups are playing an influential role in the development of personalized products and preventive insurance. The comprehensive approach motivates customer loyalty and improves growth through cross-sale opportunities and effective cost management. New technologies developed by the Israeli Start-Up Nation are shaping the future of the global insurance industry and updating its relevancy. TOP HEALTH. Private medical insurance guarantees top quality and fast medical care as a financial protection to the entire family. It works as a third pillar, on top of a particularly strong primary national healthcare system, plus supplemental health services covered by the insurance of the health funds as a semi-private affordable plan. The overlap between the private and semiprivate layers results then in some double insurance. The government is leading a regulation to clarify the limits and funding sources, to avoid purchasing twice for the same good. As many others, I have consciously decided to pay for the overlapped components and secure access to different providers of the same service. At the end, it’s a matter of balancing between the customer value perception and the insurance risk pricing. GEOPOLITICS. Israeli mortality and life expectancy rates are impressive: 10th highest life expectancy in the world, based on OECD comparable data 2020. This ranking is even more remarkable, as Israel have seen many armed conflicts. We can relate this to being Israel one of the 10 most powerful, politically influential, and militarily strong countries in the world (according to a roundup for 2022 published by US News & World Report). Further to the qualitative factor on the overall mortality, we can quantify the active war risk exposure: only about 1.5% of the population are active reservists who serve more than twenty days every three years. Another interesting statistic is the gap in life expectancy with the highest and lowest education levels, as it can be seen as a proxy to the deviation for the insured population rates, while Israel performs better than the average OECD countries. From the reinsurance perspective, Israel offers true diversification across the global portfolio. REINSURANCE PANEL. High barriers have restricted entry of new life reinsurance players to Israel. Life reinsurance high concentration is a result of decades where only big players were able to invest trying to understand our sophisticated market – in terms of products, regulations, dynamics, language, and overall culture. Aon Reinsurance approach is performing as a local and professional bridge that allows reinsurers to explore our region in a wise, long term and gradual view. We are bringing new reinsurers to the market by providing the local knowhow, in a journey that allows to identify and evaluate the business opportunities that matches precise needs and strategy. Diversifying the reinsurance panel means better risk management, acquiring a defense against a possible future outcome that may change risk appetite. The market is ready, and it has begun to open its doors to new reinsurance capacity. “We cannot solve our problems with the same thinking we use when we created them” – said Albert Einstein. We should ask ourselves: are we facing the new challenges with the right mindset?
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