Israel considers abolishing total loss insurance principle

Experts from the Capital, Insurance, and Pensions Authority recommend abolishing the "total loss" principle in Israel's auto insurance system.

Under their proposal, vehicles won't be written off solely based on repair costs exceeding their insured value. Instead, the focus will shift to determining if the damage affects the car's safety.

Additionally, they suggest limiting compensation for repairs done outside of insurance-contracted service centers, aiming to reduce auto insurance costs for consumers.

Until now, when repair costs reached 40% or more of a car's insured value after an accident, owners received full compensation, and the car was often sold to dealerships after repair. Abandoning this principle would prompt the Ministry of Transport to establish new guidelines.

Previously, owners of "totaled" cars could choose cheaper repair options at non-contracted service centers, albeit with personal contributions. Recently, insurers have limited compensation to contracted centers, sparking controversy. The Authority supports this move to reduce car part prices in Israel, which are higher than in Europe.

Specifically, there will be an upper limit on compensation. This limit will be based on the difference between the cost of repairs at a non-contracted car service center and repairs at a contracted one. This means that insurance companies won't have to cover the full cost of repairs at a non-contracted center, but the reduction in compensation will be limited.

If the insurance company doesn't fully compensate for repairs at a non-contracted service center, the car owner's contribution will match what they would have paid at a contracted service center for the same repairs.

Insurance companies failing to comply with regulations have been asked to refund millions of shekels to customers, according to Capital, Insurance, and Pensions Authority officials.