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MOST WA TED

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Israel Gets Competition
For Banks, Insurance

PINCHAS LANDAU SPECIAL TO THE JEWISH NEWS

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I

ronically, and yet in typical
Israeli fashion, against the
backdrop of political and
diplomatic paralysis on the
one hand, and the growing body
of macroeconomic data depicting
an economy in trouble on the
other, there are a series of posi-
tive developments.
These come in one of the Is-
raeli sectors that most needs an
infusion of good news and, best
of all, the tidings are positive
from the viewpoint of both the
economy and the consumer.
The whole gamut of financial
services — banking, insurance
and the capital market — are on
the verge of being opened up to
new, powerful and competitive
forces. As is often the case,
trends that have been building
up beneath the surface are
emerging into public view, mak-
ing them all the more welcome.
The most recent development
is the opening of a new direct in-
surance company, MG Golden
Insurance. True, Israel already
has two direct insurance corn-
panies that market to and ser-
vice their customers by "direct"
interaction, i.e. telephone, with-
out the need for insurance
agents.
These companies have had a
reasonable measure of success,
both in their own activities,
which have netted them a small
but growing market share, and
more dramatically in,their im-
pact on the market for property
and auto insurance, where pre-
miums have been slashed to
meet their competitive thrust.
But the new company is a
much more powerful entity. It
combines American Interna-
tional Group, a major player on
the U.S. and global insurance
scene, with Israel's Aurec Group
which, in addition to its Golden
Pages base, has built itself into
Israel's largest software compa-
ny.
Aurec is now simultaneously
entering the financial-services
field through another door, via
its partnership with First Inter-
national Bank in the Alphacard
credit-card company.
The marriage of AIG's profes-
sional status and know-how to
Aurec's marketing clout and al-
most unmatched knowledge of
the Israeli market, represents a
potential nightmare for the do-
mestic insurance industry. It is
also likely to significantly has-
ten the enforced retirement of
a large number of the country's
5,000-odd insurance agents
since, as in most Western coun-

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tries, agents selling simple in-
surance policies to households at
hefty mark-ups will be easy vic-
tims of a massive, well-planned
and prolonged assault by MG-
Aurec's telephone-based mar-
keters.
The formal arrival of AIG, an-
nounced last year but now a re-
ality, chimes in with two other
recent developments.
One of these is still unofficial,
but newspaper reports suggest
that it is impending: Discount
Investment Corporation (DIC),
one of Israel's largest and most
widespread holding companies,

is about to enter retail financial
services.
DIC is planning to introduce
the "smart card" as an alterna-
tive method of payment in Israel,
by linking up with Mondex, a
world leader in the field of elec-
tronic money.
Should this venture succeed,
it will strike a major blow to the
heart of the commercial banking
industry — i.e. the payment sys-
tems around which the whole
economy revolves.
Furthermore, by tapping the

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