Home Business SA Insurance industry shocked after multiple raids at JSE-listed companies

SA Insurance industry shocked after multiple raids at JSE-listed companies

The South African insurance industry was caught by surprise on Thursday as the Competition Commission raided the premises of eight major long-term insurance companies as part of a probe on alleged price fixing and collusion.

The insurance industry was caught by surprise as the Competition Commission raided the premises of eight major long-term insurance companies as part of a probe on alleged price fixing and collusion.

Shares of JSE-listed firms involved in the probe all fell. If the firms are found guilty of price fixing they can be fined 10 percent of their revenue.

The commission said it was conducting search and seizure operations at the premises of eight insurance companies – BrightRock Life; Discovery; FMI, a division of Bidvest Life; Hollard Insurance Group; Momentum, a division of Momentum Metropolitan Holdings (MMI); Old Mutual Insure; Professional Provident Society (PPS) and Sanlam – operating in Gauteng, KwaZulu-Natal and Western Cape provinces.

The companies, some of which are JSE-listed, said they were co-operating with the probe.

The investigation comes at a difficult time for the insurance sector, which is trying to get back on its feet post-Covid-19, which saw it fork out billions in pandemic-related claims amid a weak economy and high crime levels.

The commission said it had reasonable grounds to suspect that these companies had engaged in collusive practices to fix prices and/or trading conditions in respect of fees for investment products such as retirement annuities and premiums for risk-related products, namely, life insurance cover such as dread disease cover / chronic medical condition cover, disability cover, life cover and funeral assistance benefits in contravention of the Competition Act.

“According to the information at the disposal of the Commission, the companies under investigation share information on premium rates for risk-related products and fees for investment products, which enables them to adjust the prices of their existing and new insurance products,” it said.

The search and seizure operations were being conducted as part of an ongoing investigation that was initiated by the commissioner in January 2021 after it obtained warrants authorising it to search these companies from the North Gauteng High Court, Kwazulu Natal High Court, and Western Cape High Court.

The companies under investigation operate within the long-term insurance market. Their activities within the long-term insurance market included the offering of investment and risk-related insurance products.

The risk-related insurance products included: life cover; funeral cover; disability cover and dread disease cover/chronic medical condition cover. The most common form of investment-related product offered by the companies were retirement annuities, which becomes payable to the insured upon retirement.

Clients of these companies were citizens as well as corporate policyholders that bought cover such as retirement funds or group life schemes on behalf of their employees, the commission said.

Commissioner Tembinkosi Bonakele said, “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.”

Insurance firms said they were surprised by the raid.

Felicity Hudson, the head of Reputation Management at Discovery, said Discovery became aware of a Competition Commission investigation into the life assurance industry this morning.

“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,” Hudson said.

Anneke Hanekom, the head: Reputation Management, Public Relations and CSI Group Marketing at Momentum Metropolitan, confirmed that officials from the commission had visited Momentum Metropolitan’s head office in Centurion.