Insurers may push back on seizure of documents

As the Competition Commission begins sifting through information to build a case against eight of SA’s top insurers that it claims could be involved in price collusion, a lawyer has warned of a potential drawn-out legal dispute between the parties over the seizure of documents.

Sanlam, Discovery, Hollard, Old Mutual, Momentum Metropolitan, Bidvest Life, Professional Provident Society and BrightRock have said they will co-operate with the investigation after their offices were subjected to search-and-seizure operations by the competition watchdog last week.

The dawn raid has potentially caused the insurers reputational damage because all of them are consumer-facing businesses.

“The fact that they raided these companies doesn’t itself mean that these companies are guilty of anything,” said Ahmore Burger-Smidt, director at Werksmans Attorneys.

“If the commission has all the evidence to demonstrate that these companies are guilty, there would not have been any reason to conduct a dawn raid. Clearly, it needs more evidence to support the alleged offence.”

Any entity that is subjected to a dawn raid would consider whether the documents the commission seized were in fact provided for or legitimately seized in terms of the issued search warrant and whether the commission was entitled to all the information it seized, Burger-Smidt said.

The implicated companies allegedly colluded to fix invest

ment product fees and premiums for dread disease and life cover, in contravention of the Competition Act. If found guilty, they could be fined 10% of the relevant divisional revenue.

The commission said it had reasonable grounds to suspect that the firms colluded to fix the fees of investment products such as retirement annuities, as well as premiums for dread disease and chronic medical condition cover, disability cover, life cover and funeral assistance.

It also had information that the implicated insurers shared information on risk-related product premiums, as well as investment product fees, to enable them to adjust prices for new and existing products.

The companies have not yet been charged and if they are, the case still has to be proved at the Competition Tribunal. Even then, a decision can be appealed at the Competition Appeal Court.

“The allegations of collusion and/or price fixing should be taken seriously. The Competition Commission will undertake such a public raid on the alleged perpetrators’ offices if they believe they have sufficient evidence of collusion and/or price fixing,” said Asief Mohamed, chief investment officer of Aeon Investment Management. “One of the collaborators may have voluntarily disclosed the price fixing and or collusion in the hope that they will not be fined.”

The allegations come while the insurers are recovering from the ravages of Covid-19.

SA life insurers paid a record R608bn to policyholders and beneficiaries in 2021, according to the Association for Savings and Investment SA.

“The life insurance market is fairly concentrated in SA. It’s got very limited players and barriers to entry are very high given that high capital standards are required and [it] is highly regulated,” said Philip Sutherland, co-director of the Centre for Competition Law & Economics at Stellenbosch University.

“It will be interesting to find out how high up in the insurance value chain these alleged practices took place.”