The multibillion dollar short term insurance industry is under probe for contravening the Competition Act by setting maximum mark-up rates that panel beaters should charge for repairs to insured vehicles,
the Namibian Competition Commission (NaCC) announced this week.
Mark-up rates refer to the margins that panel beaters add on top of the costs of vehicle parts.
Total assets for the industry were valued at N$5.8 billion, according to the 2017 Namibia Financial Institutions Supervisory Authority (NAMFISA).
The NaCC confirmed this week that it has made a preliminary investigation finding in terms of section 36 of the Act that various short-term insurance companies in particular Santam Namibia Ltd, Alexander Forbes Insurance Company Ltd, Hollard Insurance Company Ltd, Old Mutual Short-Term Insurance Company Ltd, Outsurance Insurance Company of Namibia Ltd, Phoenix Assurance Namibia Ltd and Momentum Short-Term Insurance Ltd (previously Quanta Insurance Ltd) have engaged in collusive conduct, specifically price fixing, in contravention of the Competition Act by setting maximum mark-up rates that panel beaters should charge for repairs to insured vehicles.
“The Commission’s investigation has further found that on top of setting maximum mark-ups on parts, these insurance companies further impose maximum labour rates to be charged by panel beaters for the rendering of their services. Labour rates refer to the costs per hour charged by panel beaters for the repair of vehicles,” it said in a statement.
The Competition Act, 2003 classifies price fixing conduct as prohibited, rendering the conduct as inherently illegal without extrinsic evidence of the effect of the conduct.
“The conduct by the insurance companies is designed to subvert competition and is characterized globally as cartel conduct being amongst the most egregious forms of collusion between competitors.”
It said the commission’s preliminary investigative findings show that insurance companies have set the maximum rates and mark-up in order to reduce their cost without due 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 beater competition and limited consumer choice and potentially, prevent consumers from having access to better pricing.”
The commission said by setting similar mark-ups and rates, the insurance companies have further reduced competition amongst themselves as these rates and mark-ups influence the premiums they charge their policyholders.
The commission said ultimately insurance companies benefit from potentially unfair excess profits that would ordinarily not prevail in the absence of their anti-competitive prohibited conduct.
“Under normal competitive conditions, insurance companies would consider the lowest substantial quotation from a group of panel beaters, panel beaters would as a result seek to compete against each other to ensure that they secure the work through employing innovative strategies that would reduce cost and improve efficiency.”
The commission said the companies will respond to the findings on 29 August, after which the commission will decide whether or not it will refer the matter to the High Court for remedial action as prescribed in the Competition Act.