Who doesn’t remember those awful days when we bounced from one insurance company to another in order to receive a good price quote for car, business, or homeowners insurance? And what did we get? The same price quote from all the insurance companies. You
Insurance Cartel Investigations
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Insurance Cartel Investigations


By: Uri Shitrit

Who doesn’t remember those awful days when we bounced from one insurance company to another in order to receive a good price quote for car, business, or homeowners insurance? And what did we get? The same price quote from all the insurance companies. You cannot live without insurance - everyone knows that.

We were forced to sign the policies offered to us without enjoying the option of choosing the most inexpensive and attractive offer. Why did that happen? Because the insurance companies were not only not competing for clients, but they had illegally coordinated their prices. That way, anyone trying to compare prices between supposedly competing companies would get the same policy anywhere.

The client remained helpless in the face of the cartel created by the insurance companies. Who could he turn to?  Who would provide the legal assistance in supervising the insurance business and its arrangements? The Business Limitations Authority was, as it remains today, the right address for complaints about price coordination. The law for business limitations provides a response and investigative authority to cartel violations (or, in legal terms, “making a restrictive agreement”) that prevent competition and harm the consumer. 

We should remind you that in 1992, the year when comprehensive and long-lasting investigations into the suspicious insurance companies’ behavior begun, few (if any) had heard of the Business Limitations Authority which was still in diapers.

Yoram Torbovich, today the Director of the Prime Minister’s Office, was appointed as Director of the Authority one year earlier. At his disposal then were a secretary, two lawyers, and two private investigators licensed by the State Attorney. A year later, I accepted Yoram Torbovich’s offer to establish and head the investigation division of the authority. After seven years of working in the National Unit for Fraud Investigations, I decided to take on the challenging role.

A few months before arriving at the Business Limitations Authority, investigations against the insurance companies had commenced following a complaint filed by a client who felt injured by the tight cartel of the insurance companies. The authority was faced with its first significant test. After a series of consultations with the Director of the Authority and the Attorney General, the green light was granted. 

The investigation team was reinforced by additional investigators. The complaint was examined. It was decided that the insurance companies had allegedly broken the law against building a cartel, as was attributed to them.  The team prepared itself to simultaneously conduct searches in the various insurance company offices. Lists and addresses of the targets of search and investigation were prepared.

The team of investigators raided the insurance companies. Thousands of documents were seized that were sufficient for the investigators to base their suspicions.

For days the investigators studied and sorted through the documents. The preparations for summoning the suspects for interrogation were completed. The required questions were prepared. An interrogation file was prepared for every subject, including relevant documents and questions that they would have to answer. 

The march of subjects to the authority’s offices kept the investigators busy for a year!  All the senior executives of the insurance companies were investigated. Anyone involved in building the cartel met with the investigators.  Confrontations were held. Documents and testimonies were crosschecked.

The initial findings were presented to the Director of the Attorney General’s Financial Division back them, Shimon Dolan, who accompanied the investigation from beginning until trial management, after the indictments were delivered. The investigators were required to complete the investigation according to the Attorney General’s directions. The investigations were completed as necessary.

Over the course of the investigation it became clear that various levels of directors in the insurance companies had knowingly coordinated insurance prices. A client approaching them in order to get a price quote would not know that he actually received the same offer coordinated in advance between the insurance companies.

From the investigation that I directed I remember that the insurance company directors used to sit in “Keren” restaurant (owned by Chef Haim Cohen who now stars on the “Garlic, Pepper and, Olive Oil” television show), and while filling themselves with good wine and gourmet food they finalized their agreements regarding insurance prices. 

At the end of the investigations, indictments were delivered to all those involved.  Almost all the directors chose to reach a plea bargain. The plea bargains were approved by the Court for Business Limitations. The Insurance Supervisor in the Treasury Office forbade the convicted directors from ever managing insurance companies again. And indeed, the convicted directors never dealt in insurance again.

Don’t worry about them. Every one of them found their way. The conviction didn’t harm their professional and financial advancement. They still rake in the millions from stock options and benefits. 

Those who continued to fight the legal battle in order to prove their innocence were the director of the Phoenix Company, Itamar Borovitch, and the owners of the Ayalon Company, Levi and Noga Rachmani. Their appeal to the conviction went all the way up to the Supreme Court.

The Supreme Court left the decisions of the regional courts as they were, except for a credit on behalf of a provider based on a minor clause related to auto insurance. The Supreme Court acquiesced to the appeal of the state to double the fines of the accused.

In the end it was decided that Itamar Borovitch would serve six months incarceration (which could be converted to community service time) and pay a fine of 1,200,000 shekels. Levi Rachmani would serve six months imprisonment (which could be converted to community service time) and pay a fine of 600,000 shekels.  Noga Rachmani, it was decided, would serve three months imprisonment (which could also be converted to community service) and pay a fine of 300,000 shekels.

Thus ended, and not quietly, one of the most complex and significant investigations directed by the Business Limitations Authority. The repercussions of these investigations are felt till this day. The investigation and its results in essence built the authority and placed it deep in the awareness of the business sector.

Since then, the stream of complaints has not ceased. No one can defensively claim that they did not know about the Business Limitations Authority or law, and therefore unknowingly violated the rule against building a cartel or merger and/or creating a monopoly.

Regardless of the investigation into insurance companies, we advise all consumers to take advantage of the competition in any field.  If you come across illegal mergers or limiting arrangements, the path to registering a complaint and bringing forth the necessary change for the good of a healthy, competitive economy is open to you.