FIFI PETERS: South African long-term insurance companies could find themselves in hot water if the Competition Commission’s allegations against them are unfounded. The commission has conducted and will conduct raids on the offices of major long-term insurance companies across the country, [which] believes these companies fix prices on things like funeral plans or funeral insurance, disability insurance, chronic drug insurance, and investment-related products like retirement annuities. We know that when companies fix prices, they make excessive profits.

Read: CompCom raids eight major insurance companies

We have Sipho Ngwema, Head of Communications at the Competition Commission, to find out more. Sipho, thank you very much for your time. It’s a really disturbing story in this environment – if it’s true – that companies are behaving opportunistically, especially with products that are so necessary and important to human well-being.

However, your investigation into the long-term insurance sector began in January 2021. At that time, we were still quite actively fighting the pandemic. I am not sure whether it was the third or the fourth wave then. But what did you discover as a result of that investigation that led you to raid or move to raid these companies?

SIPHO NGWEMA: Good evening Fifi, good evening listeners and thanks for having us on the show.

Competition Commissioner Tembinkosi Bonakele opened an investigation in January 2021. This comes after the commission received information that appears to be a breach of the Competition Act in relation to the companies we conducted today. The information suggests that there may have been a collusion that led to price fixing between these companies on various long-life items.

Such sharing of information violates the Competition Act [what] led us to raid these companies – eight of them today, five in Gauteng, two in the Western Cape and one in KwaZulu-Natal – in search of more information that could support the allegations.

At this time, we are still gathering evidence that can support us regarding the information we already have. This suggests that there may have been price fixing between these companies. So we collect documents, collect available data, even in electronic devices, that can help us in further investigation based on the allegations we receive.

FIFI PETERS: As for the companies in question, we are talking about BrightRock, Discovery, FMI, Hollard Insurance, Momentum, Old Mutual. [Insure], Professional Provision Society (PPS) and Sanlam. I think it’s important – for some of our listeners who don’t know exactly who these eight are – that we name them.

The raid took place today. How did it go? And these companies, did they comply, did they provide the information that you took from their offices?

SIPHO NGWEMA: Raids continue. So far, I have not received any information that there may be any difficulty in accessing or accessing the documents that we have sought in relation to the various companies that you have mentioned on all eight of these sites. However, we would be able to get all the information, regardless of whether everything went smoothly everywhere, when everyone finishes when we do the debriefing. However, as we gather information as we go, there appears to be no indication so far that there was any resistance or obstruction to the law enforcement actions that took place today.

I think that’s a good thing because we’ve been allowed to make sure that we continue to fulfill our mandate in terms of the law, and we’ve been allowed to continue our investigation. We hope that the situation will continue to be this way, because at this point I have to add, and I want to emphasize that

we are still collecting evidence and if after reviewing this information, [we hope to be] able to find out if the charges we have now can really be substantiated.

FIFI PETERS: How long are the raids likely to last?

SIPHO NGWEMA: It depends, as I said, on the amount of information they get, the amount of paperwork they have to go through. We will be getting updates throughout the night and will probably be able to find out later in the night if we can continue tomorrow. But the operation is still ongoing. Our official representative *** this information so that we can ensure that it is properly prepared in a document that can be forwarded to our head office so that we can review it and continue our investigation.

FIFI PETERS: Based on the information you have – in which you clearly believe strongly that you have a case against these insurance companies – what exactly do you think they did here? In terms of the prices consumers pay for funeral insurance and disability insurance, as well as chronic health insurance and retirement annuities, what do you think these companies have done and how much more have we had to pay as a result of their alleged misconduct?

SIPHO NGWEMA: Yes, indeed, Fifi. Look, the information we have has passed the credibility check, and that’s why we’ve taken today’s action.

And now it appears that because of the information that we have, these companies have shared information and fixed prices for long-term insurance products in terms of risk products and other investment product fees – and so they’ve been able to adjust the prices of their existing products and other new insurance products. And the products that we’re talking about, I think you mentioned them briefly, just in terms of the long-term insurance market, they offer, you know, investment and risk-based insurance products.

In this particular case, the information we have is that there was a conspiracy regarding life insurance, funeral insurance, disability insurance, critical illness and chronic illness insurance, and other investment-related products such as retirement annuities.

These companies seem to have adjusted their prices. Then they fixed the price among themselves. And at the end of the day, the problem — and that’s why we have this mandate in the competition commission — is that there was virtually no competition.

If there is competition, prices can come down and this is passed on to the consumer and the consumer can have a choice in the market. You have the best quality and the best prices.

But when these people do that and they all look the same, it’s very difficult for the consumer to get the best price because they’ve agreed on a specific price among themselves.

So that’s an allegation that we’re investigating — and if that happened, that means the consumer in that particular case was violated, the law was violated. But of course, as I said, we’re currently gathering that information, and eventually we’ll see if there really was a breach and [if] so everyone should be held accountable.

FIFI PETERS: Again, because if it did happen, it wouldn’t be the first time. Seen with bread. We’ve seen it with tires, some HIV drugs. Banks are also accused of doing funny things with the rand. This continues to happen. I wonder what signals this sends to the commission [regarding] whether the penalties you apply to companies that break competition laws really work if it happens again.

SIPHO NGWEMA: Fifi, I know there’s a lot of criticism about the fines that are being imposed on these companies or some of the agreements that we’re reaching with those who have admitted to being involved in one way or another. But we as a commission, we as employees of the commission do not make laws, we implement them. We get lawyers. We cannot impose what is not prescribed by law.

Parliament makes laws and they believe that, in relation to these particular offences, these are the parameters in terms of the fines that should be imposed.

Therefore, the tribunal or anyone from the competition authority cannot do more than what is required by law.

It is the duty of law makers and policy makers to sharpen these tools. So there is very little we can do about imposing fines or any other type of punishment. Everything we have to do, since we have the law, we have to work within the framework given to us by those who make the law.

FIFI PETERS: Good. Sipho, thank you so much for this. We will follow this story with you. Please keep us posted. Sipho Ngwema is the Communications Manager for the Competition Commission.

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