Improving the Financial Education and Financial Literacy – The Israeli Perspective

1. Improving the Financial Education and Financial Literacy – The Israeli Perspective OECD, Insurance and Private Pension Committee – 78th Session, Paris, 14-15 December 2006 Lavi Schiffenbauer – Head of Information and Development Department Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

2. Contents • The public’s financial assets portfolio • The CMISD’s mission and goals • Why financial education has growing importance in Israel • Findings from the social survey of the Israeli CBS • Fundamental aims of the CMISD in terms of financial education • Improving financial education in Israel • Infrastructure supporting financial education in Israel - Illustrations Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

3. The Capital Market, Insurance and Savings Division The Commissioner of the CMIS • Provident funds • Pension funds • Life insurance • Non-life insurance • Health insurance • Actuary • Capital market • Supervision of the Institutional entities • Agents & advisors • Information & reporting • Money services providers • Public complaints • Enforcement & Investigations • Information & development (research) Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

4. The Public’s Financial Assets Portfolio Total assets (09/2006): NIS 1,762 ($ Billions 410) Distribution of long-term savings mechanisms, 09/2006 Distribution of asset portfolio by institutional composition, 09/2006 Source: Bank of Israel Source: Bank of Israel Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

5. The CMISD’s Mission To assure the optimal level of financial security to the customers of the financial services in Israel which are supervised by the division Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

6. The CMISD’s Primary Goals To promote, encourage and ensure: • A variety of financial products, available to all and for every need • Integrity, transparency and fair products pricing • Customer’s awareness and comprehension for intelligent acquisition of financial products Customer’s side Financial institution’s side • Securing the institution’s stability to ensure solvency of public obligations • Securing system stability System wide considerations • Open, fair and competitive financial markets Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

7. Why Financial Education has Growing Importance in Israel • To increase competition in the Israeli financial system • The increasing complexity of financial services requires greater understanding • Changes in social-demographic issues Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

8. Findings From the Social Survey of the Israeli CBS Population of working 40-65 year olds, according to the amount of thought they put into their retired years Population of over 20 year olds, covered by a pension or savings plan for retirement, according to their choice of advisor Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

9. Fundamental Aims of CMISD in terms of Financial Education • Help the consumer to better understand their personal finance and identify correctly the relevant risks • Promote a responsible consumer approach in personal financial decisions • Strengthening the consumer status in the financial market Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

10. How the CMISD Implements its Goals • Fair disclosure • Market transparency • Reliability by means of financial consumer information – Comparison tables, Internet sites, E-learning information, Public complaints department, Consumer guides Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

11. Improving Financial Education in Israel, 2004-2006 • Circular letters issued by the commissioner • Annual report to life insurance policyholders or pension funds members • Consumer guide to long-term care insurance • How members/policyholders can transfer their accounts between the long-term saving plans • Required reports to members of provident funds following transfer or withdraw of funds • Full and fair disclosure in life insurance Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

12. Improving Financial Education in Israel, 2004-2006 • Circular letters issued by the commissioner • Publication of highlights of insurance companies’ financial reports in newspapers • Required information in the company's/fund’s internet site • Regulations regarding advertising investment yields for participating policies, provident funds or pension funds • List of individual assets for participating policies to be reported on the company's internet site • Regulating pension consultant and agents Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

13. Infrastructure Supporting Financial Education in Israel – Illustrations • Compulsory vehicle insurance calculator http://www.mof.gov.il/hon/2001/insurance/car.asp • Provident funds comparison tool http://gemelnet.mof.gov.il/Tsuot/UI/DafMakdim.aspx • The objects are: • An accessible, reliable, up-to-date information source • An independent comparison ability by the customer • A thorough examination of the yields/rates Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

14. The Calculator – Illustration I General insurance terms Importance of comparing car insurance rates To use the calculator Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

15. Type of car (public or private), date of beginning of the policy • Input parameters of the youngest driver profile (gender, age, years of driving experience) • Additional drivers information (accidents, violations) • Car information (air bags, engine, etc.) Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

16. Explanation of the parameters Rates according to company Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

17. The Provident Funds Comparison Tool – Illustration II • Selection by company name or number • Selection of the period 1 2 Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

18. The results Net withdrawals Total assets Gross accumulated return Average monthly return Reporting dates commission The name and number of the company Gadish Dash Provident funds average Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

19. Comparison to market indices • Selecting the type of report and company • Selecting the market indices • Selecting the type of data (monthly, accumulated, annually) • Selection of the period 3 2 1 4 5 Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

20. Dash Gadish DJ The resulting report $ The Dow-Jones The US $ Dash 552 Gadish - 106 Accumulated return Monthly return Total assets Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel

21. In Summery… “…..The Sun of Righteousness Shall Arise With Healing in its Wings…..” (Malachi, Chapter 4, Verse 2) Thank you for your attention lavis@mof.gov.il Capital Market, Insurance and Savings Division, Ministry of Finance, State of Israel