Insurance big-sharks busted for price fixing

20 Aug 2018 14:40pm

Big names in the insurance industry have been caught pants down by the Namibia Competition Commission (NaCC) for fixing prices that panel beaters should charge for repairs to insured vehicles, otherwise known as collusion.

The NaCC’s net has dragged along big names like Old Mutual Short-term Insurance Company Ltd, Hollard Insurance Company Ltd, Alexander Forbes Insurance Company Ltd, Santam Namibia Ltd, Outsurance Insurance Company of Namibia Ltd, Phoenix Assurance Namibia Ltd, and Momentum Short-term Insurance Ltd, previously known as Quanta Insurance Ltd. 

Investigations that led to this huge bust are still at a primary stage, NaCC cautioned but has also found that on top of setting maximum mark-ups on parts, they further imposed maximum labour rates to be charged by panel beaters for the rendering of their services.

Price fixing as per the Competition Act of 2003 is illegal in Namibia and the insurance companies’ conduct is designed to disrupt competition, the NaCC said. 

“The Commission’s preliminary investigative findings show that insurance companies have set the maximum rates and markup in order to reduce their cost without having regard to panel beaters’ input cost.”

“In doing so, insurance companies unjustly influence the price rather than allowing competition to determine the prevailing market conditions. These insurance companies further benefit from the costs imposed to the detriment of reduced panel beaters’ competition and limited consumer choice and potentially, prevent consumers from having access to better pricing,” said NaCC.

These insurance top-guns’ action has reduced competition among themselves as the fixed rates and mark-ups influence the premiums they charge consumers.

According to the NaCC, they put themselves at the point of potentially benefiting unfair excess profits that would ordinarily not prevail in the absence of their anti-competitive prohibited conduct. 

The commission has also warned that their conduct has further adverse effects on the competitiveness of the downstream market, being the panel beater market.

“Under normal competitive conditions, insurance companies would consider the lowest substantial quotation from a group of panel beaters who would resultantly seek to compete against each other to ensure that they secure the work through employing innovative strategies that would reduce cost and improve efficiency,” said NaCC.

This innovation has been curtailed, it concluded due to the behavior of the culprits.

In the meantime, the culprits are yet to come out and make their case.