Uniform Insurance Certificate – Updated Version from 2/2023
Dec 26, 2023
By: Attorney Shikma Levi Ezra / Manager of Claims and Contracts
The Capital Markets, Insurance and Savings Authority (hereinafter: "the Authority") published an important circular in September 2022, which is a continuation of the previous uniform insurance certificate circular published on December 1, 2019. The latest circular, which entered into force in February 2023, brought with it a number of very significant updates.
Main changes
The new circular outlines guidelines for issuing an insurance certificate and presents a uniform format for insurance certificates. Insurance companies have been prepared in accordance with the update and are obliged to issue insurance certificates while adhering to the most recent version and without the possibility of changing the version. The following are key changes that were determined in the new circular as part of the update of the insurance certificate (in accordance with the comments received by the Authority and in light of the needs of the insured public):
Lists have been expanded.
Appendix C, which lists the service codes, has been updated and new codes have been added.
Appendix D, which details the extensions and coverages provided within the insurance framework, was updated, and additional extensions were added that were not previously coded, and the insurance companies noted those extensions in lines of text in the insurance certificate.
The option has been added to add information regarding the amount of the deductible if the information is required by the applicant for approval regarding certain coverages.
The wording of the appendices was adjusted to allow for the possibility of producing a certificate that constitutes consent to taking out insurance only, without a valid insurance policy.
The source of change
In contracts of engagement in various fields of activity, including, of course, contract work, the parties ordering the work place various demands on the service providers (suppliers, subcontractors, etc.). The service providers are asked by the party ordering the service/work to present them with a certificate of insurance that actually reflects the terms of the policy and whose purpose is to ensure that the services provided are insured, in accordance with their requirements.
The principle is clear . The client wants to ensure that he will not be exposed to damage that may occur in the course of receiving the service. In the construction industry, where the client can be an integral part of the chain of responsibility for incident control, this is even more true.
In the construction industry, this actually leads to the production of thousands of permits per year, the process of obtaining which is complicated and long. Both for contractors and clients, and especially for insurance companies and insurance agents. Not only that, over the years we have seen how the insurance permit has led to a revolution that has gone out of proportion. What was supposed to be a simple document confirming the existence of insurance, has frequently become an obstacle that delays transactions and even "drops" agreements.
Insurance approval is often used as a digging tool in risk management issues, requiring the existence of an insurance envelope that burdens the insured, both in terms of the premium and in dealing with high, excessive and unreasonable insurance requirements. It is not without reason that many in the Israeli insurance industry have been talking for many years about the need for a "uniform insurance approval" (something like the Accord used in the American market). In other words, the wording of an insurance approval is readable, simple, clear and unambiguous.
In contracts across various industries, including construction, clients impose requirements on service providers such as suppliers and subcontractors. These providers are asked to present a certificate of insurance reflecting their policy terms and confirming that the services they provide are insured in accordance with the client’s requirements.
The principle is clear. The client wants to avoid exposure to losses that may arise from receiving the service. This is particularly important in construction, where the client may form an integral part of the chain of parties held responsible when an incident occurs.
In practice, thousands of certificates are issued every year in the construction industry through a lengthy and complicated process. This affects contractors and clients alike, but particularly insurers and insurance agents. Over the years, the role of the insurance certificate has expanded out of all proportion. What should have been a simple document confirming that insurance exists has frequently become an obstacle that delays transactions and even causes agreements to fall through.
Insurance certificates are often used as a means of imposing risk management requirements, demanding insurance arrangements that burden policyholders through both higher premiums and excessive, unreasonable coverage requirements. It is therefore unsurprising that many in Israel’s insurance industry have long called for a standardized certificate of insurance, similar to the ACORD forms used in the United States: a document that is readable, simple, clear, and easy to understand.
Until the Authority's new circular regarding "Confirmation of Insurance Existence," the insured would produce an insurance certificate signed by his insurance company, according to the specific wording dictated by the client, although in certain cases the wording dictated did not reflect and coordinate the insured's policy, but rather reflected mainly the main obligations of the parties specified in the agreements. Therefore, the free text resulted in the insurance supplements being cumbersome, long, and subject to many disputes.
This situation created a situation in which insurance certificates were issued without matching the insured's insurance policy and without notification to the Capital Market, Insurance and Savings Authority (as required by Section 40 of the Financial Services Supervision Law).
Also, as noted above, the Authority was aware that insureds frequently encounter requirements for issuing insurance certificates in a manner that imposes high costs on them, which constituted a barrier to contractual agreements and frequently created a lack of clarity regarding insurance coverage.
The purpose of the new circular is to establish uniform and clear instructions to regulate the conduct of insurance companies when issuing insurance certificates, with binding and uniform wording for the above-mentioned certificates. The Authority believes that the circular has several advantages:
• Creating a common language in issuing insurance certificates.
• Insureds will now be able to easily obtain the information relevant to them.
• Receiving the information will help insured persons in dealing with tenders and/or in contacting job seekers.
• Ending disputes regarding gaps in expectations and coverage definitions.
• Reducing the bureaucracy involved in obtaining insurance approval.
• Promoting operational efficiency and promoting transparency principles.
• Increasing the reliability of insurance certificates.
• Increasing business competition and encouraging contractual agreements.
Did the authority "pick up the gauntlet"?
Before the Authority issued its new circular on certificates of insurance, the insured would provide a certificate signed by their insurer using wording prescribed by the client. In some cases, however, that wording did not accurately reflect the insured’s policy. Instead, it primarily reflected the parties’ contractual obligations. This unrestricted wording resulted in cumbersome, lengthy insurance appendices that were open to numerous disputes.
As a result, certificates were issued that did not correspond to the insured’s policy, without notification to the Capital Market, Insurance and Savings Authority, as required under Section 40 of the Supervision of Financial Services Law.
Furthermore, as noted above, the Authority recognized that policyholders frequently faced demands for insurance certificates that imposed substantial costs, created barriers to entering into contracts, and often caused uncertainty about insurance coverage.
The new circular aims to establish clear, uniform rules governing how insurers issue certificates of insurance, using mandatory, standardized wording. The Authority considers that the circular offers several benefits:
Establishing a common language for issuing certificates of insurance.
Making relevant information readily accessible to policyholders.
Helping policyholders participate in tenders and enter into agreements with clients.
Resolving disputes arising from differing expectations and definitions of coverage.
Reducing the bureaucracy involved in obtaining a certificate of insurance.
Improving operational efficiency and promoting transparency.
Increasing the reliability of insurance certificates.
Enhancing business competition and encouraging contractual engagements.
What is the change from the previous situation?
Prior to the substantial change under this circular, the client was entitled to include an appendix to the contract regarding insurance approval and to formulate it as he wished and required. The insurance company would receive the request for approval, make handwritten corrections or changes, and after a ping-pong of feedback, the approval would finally be adjusted to the final agreements in the contract.
Now, in light of the authority's guidelines, what was is not what will be. On the one hand, the person ordering the work will not be allowed to submit insurance in free text, and on the other hand, the insurance company that signs the certificate will not be allowed to deviate from the standard wording.
Insurance certificates will now be issued by insurers only in accordance with the wording that was determined and attached to the "Insurance Certificate" circular. Insurance companies, as well as insurance agents, will have no authority to change the uniform wording.
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