Bank Leumi (TASE: LUMI), managed by CEO Rakefet Russak-Aminoach, plans to expand its insurance and pension savings business by selling new insurance policies to its customers in addition to the pension advice and mortgage insurance it already provides.
Sources inform "Globes" that Bank Leumi asked the Capital Market, Insurance, and Savings Authority in recent days for permission "to be an owner of a credit insurance policy for the bank's customers." The purpose of this policy is to provide the bank's private customers with a breathing space if they become unemployed in regular credit payments, "to enable customers to bridge the gap in the time required to find other employment."
The letter sent by Bank Leumi to the Capital Market, Insurance, and Savings Authority, of which "Globes" has obtained a copy, lists the events that this insurance will cover. First of all, the insurance will provide a solution for a customer who is an employee. Secondly if a customer is self-employed, the bank will provide a solution for termination of activity due to economic difficulties for a still-unspecified period.
According to the bank's plan, claims will be paid in a single payment based on the amount of credit used by the customer on the date when he or she became unemployed.
"Few people do not need credit"
Bank Leumi's regulation department explains, "The need for this insurance has become very clear in recent years, following the increase in household credit and the lack of an insurance solution from the National Insurance Institute for the self-employed." The regulation department adds, "Few households in Israel do not need credit at some stage… At the same time, in most cases, the regular salaries of households are used as the primary resource for repaying the credit that they take in order to supply basic needs."
The bank also writes in its letter to the insurance regulator, "In these cases, which are usually temporary until an alternative livelihood is found, households must cope with obligations resulting from the credit they took (in addition to other challenges stemming from the situation facing them) at a time when the resources they used when they were earning a living are no longer available to them."
Bank Leumi is therefore seeking to be a "policy owner," which will enable it to offer customers this insurance under commercial terms to be set, if and when the capital market regulator allows it.
Second largest credit portfolio
Bank Leumi and Bank Hapoalim (TASE: POLI) are the dominant players in retail credit to the general public. As of the end of the first half of 2018, after deducting provisions for credit losses, Bank Leumi provided private customers with a total of NIS 115 billion in credit (mostly mortgages). The bank also provided NIS 27 billion in credit to small businesses.
A breakdown of customers according to the rules of the Supervisor of Capital Markets, Insurance, and Savings shows that as of the end of the first half of 2018, Bank Leumi provided over NIS 164 billion in credit to retailers and small businesses. Bank Leumi's portfolio of credit to households and small and micro-businesses is the second largest in Israel after Bank Hapoalim.
For a long time, the banks have expressed their wish to expand the pension consultation that they provide to the general public to other areas of pension insurance. The banks entered the pension consultation field following the Bachar reform in the middle of the preceding decade, in which they were obligated to sell the provident funds, advanced training funds, and mutual funds previously under their control, while at the same time becoming pension advisors, a status that did not previously exist in pension distribution.
Published by Globes, Israel business news - en.globes.co.il - on November 7, 2018
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