Sources inform ''Globes'' that the Ministry of Finance Capital Markets, Savings and Insurance Division is considering limiting insurance companies' ownership of insurance agencies. The restriction could force companies, such as Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), to sell some of the large agencies that they own, and greatly restrict their ability to own small and mid-sized agencies.
The Ministry of Finance plans to carry out staff work on the matter, which will focus on the effect of cross-ownership on competition. During 2012, Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig will formulate recommendations. The recommendations could be wide-ranging, including a ban on ownership, cross sales, limits on market share, and a ban on new acquisitions, depending on the company, its size, and the size of the insurance agency.
A source in the insurance industry said that he was unconcerned about the Ministry of Finance's intentions. "There has been talk about this, but it's hard for me to believe that the Ministry of Finance can pass such a dramatic measure," he said.
Migdal currently owns Mivtach Simon Insurance Agency Ltd., Israel's largest insurance agency, as well as the Nahum Shaham Insurance Agency (1995) Ltd., Sagi Yogev Insurance Agencies (1988) Ltd., and Peltours Insurance Agencies Ltd. Clal Insurance owns Tmura Insurance Agency (1987) Ltd., Israel's second largest agency, as well as Toren Insurance Agency Ltd. and Clalbit Ltd. Phoenix owns several large agencies, including Shekel Insurance Agency Ltd., Agam Liderim Insurance Agency (2007) Ltd., Kela Insurance Agency Ltd., and Oren Insurance Agency.
The Capital Markets, Savings and Insurance Division believes that there is a serious problem of cross ownership in the insurance products distribution market, because of agencies' tendency to sell the products of the company that owns them at a higher proportion than the company's share of the market. This problem is exacerbated at fully-owned agencies.
A study by the Capital Markets Division last year found what it calls "serious findings" about the mix of sales by agencies owned by insurance companies, especially in the pension segment, where it is very hard for consumers to compare products and their understanding is limited. The Capital Markets Division found a clear preference by agencies to sell their clients the products of the insurance company that owns them.
Published by Globes [online], Israel business news - www.globes-online.com - on October 30, 2011
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