South African insurers in cahoots – CompCom

The Competition Commission alleged that eight insurers have been colluding for 34 years, and these companies face huge fines if found guilty.

On 25 August 2022, the Commission raided the offices of BrightRock, Discovery, Bidvest Life, Hollard, Momentum, Old Mutual, PPS, and Sanlam.

The raid formed part of an investigation into alleged price fixing in the life insurance industry. 

The Commission said that it has “reasonable grounds to suspect” that these companies have “engaged in collusive practices to fix prices” regarding fees for investment products and premiums for insurance products. 

It is alleged that the companies share information about the premiums and fees they charge with their competitors. 

This was done by each insurer keeping a rate book with records of the prices they charged for specific products. These rate books were then exchanged between insurers to fix prices. 

Insurers have adapted to share information on flash drives and exchange log-in details via email, giving them access to each other’s pricing information.

The Commission released one email exchange as an exemplar between an actuarial supervisor at Old Mutual and a Liberty employee, where the Old Mutual employee requested Liberty’s latest premium rates and received a response. 

The Commission seized documents and electronic data from specific departments and employees of the eight insurers. 

The offices of eight employees at Sanlam were raided, nine at Old Mutual, eleven at Momentum, eleven at Liberty, seven at PPS, six at Bidvest Life, five at BrightRock, three at Hollard, and two at Discovery. 

What has been said since

Former commissioner of the South African Competition Commission, Tembinkosi Bonakele

Former commissioner of the South African Competition Commission, Tembinkosi Bonakele, said earlier this year that the investigation is “quite advanced”. 

Bonakele said the raids are only one of the tools the Commission has to investigate anti-competitive behaviour, and “the fact that somebody is raided doesn’t mean they are guilty”. 

It has since come to light that technical information was also shared among the insurers so that similar products could be created. 

The Commission also contends that the movement in insurance premiums after Covid-19 was suspicious, with all insurers increasing premiums in lockstep. 

These increases in life insurance premiums were despite the mortality rate from Covid-19 declining at the end of 2021 and throughout 2022. 

“In a desirable competitive environment, at least one of the major insurers could have taken the view that the 2022 mortality shall be better than 2021, and consequently reduced premiums from the increased values of 2021,” argued the commission.

Potential punishment

Section 4(1)(b)(i) of the Competition Act prohibits any agreement, concerted practice, or decision by competitors that involves directly or indirective fixing a purchase or selling price. 

Potential punishments vary, as do cases brought before the Competition Tribunal, which plays the role of a court, with the Commission performing the role of prosecutor.

However, competition investigations, even of this kind, are not rare in South Africa. Previous investigations included a similar case against 17 local and global financial institutions for fixing foreign exchange rates. 

It included global giants such as JP Morgan, BNP Paribas, Standard Chartered, and local banks such as Absa, Standard Bank, and Investec. 

In this case, the Commission sought to impose an administrative penalty equal to 10% of the companies’ turnover – the highest applicable penalty. 

If such a penalty was applied in this case, large insurers would likely have to pay fines worth billions of rands.


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