The Competition Commission raided the offices of eight major insurance companies and seized documents on Thursday afternoon as part of its probe into allegations of collusion and price fixing in South Africa’s insurance industry.
The competition watchdog raided the offices of Discovery Limited, Hollard Insurance Group, Momentum, Old Mutual Insure, Sanlam, Professional Provident Society Limited, FMI (a division of Bidvest Life) and BrightRock Life.
The Competition Commission believes the companies “have engaged in collusive practices to fix prices and/or trading conditions” regarding the premiums that consumers pay for investment products such as retirement annuities, and insurance products offering cover against dread disease, disability and death.
In a statement published on Thursday, the commission said the insurance companies shared information about the premiums they charge consumers for investment and insurance products. This enables the eight companies “to adjust the prices of their existing and new insurance products” — which is in contravention of the Competition Act, specifically the clause that discourages competition from being prevented or lessened.
The commission didn’t reveal details of its investigation into the eight insurance companies, which it launched in January 2021.
It’s unclear how long the alleged collusion among the companies has been running or if insurance policyholders (consumers) were disadvantaged by paying high premiums.
If the insurance companies are found guilty, the commission might recommend that the Competition Tribunal, which rules on such cases, impose an administrative fine. The fines are usually equal to 10% of the revenues that the companies have generated over a fixed period, mostly over one year. But major corporations tend to fight the commission and appeal against any sanctions imposed on them, as seen in the long-running case against commercial banks, which have been accused of colluding to fix currency prices.
The raid saw offices of insurance companies across Gauteng, KwaZulu-Natal and the Western Cape being searched as part of a process to gather evidence that could support the Competition Commission’s probe.
During the searches, the commission seized documents and electronic data which will be analysed to determine whether the eight insurance companies contravened the Competition Act. The commission said it obtained warrants from high courts in Pretoria, Durban and Cape Town, authorising it to search the offices.
“The search and seizure operation is part of the routine process of evidence gathering and we urge all involved to allow the investigation to run its course. The commission will at an appropriate stage reveal the outcome of the investigation,” said Commissioner Tembinkosi Bonakele.
The insurers respond
Most of the insurance companies implicated in the commission’s investigation confirmed that their offices were raided. They have also pledged to cooperate with the commission’s investigation.
Momentum Metropolitan said it was committed to providing the commission with required documents that are relevant to its investigation. “We have no reason to believe that we are guilty of price fixing. We reiterate our commitment to ongoing compliance with all regulatory requirements,” it said in a statement.
Old Mutual said it couldn’t comment on the merits of the commission’s investigation but the insurer was “committed to acting responsibly while executing our business strategy and delivering great value to all our stakeholders”.
Sanlam also said it would communicate with stakeholders when appropriate.
Discovery shared similar sentiments. “We uphold all of the principles of the Competition Act and are complying with the commission’s request for data and information related to their investigation, and will continue to co-operate with their industry-wide investigation to the fullest extent possible,” the company said.
News of the commission’s ongoing investigation has spooked investors on the JSE. Shares of Sanlam, Momentum Metropolitan, Old Mutual, and Discovery each fell by more than 1% on Thursday. DM/BM
Article updated to include comments by insurance companies.