Opinion: Interrogating anti-competitive behavior by vehicle insurance providers
The Namibian Competition Commission has announced its intention to institute proceedings in court against short-term insurance providers and windscreen suppliers for engaging in anti-competitive behavior that places insurance policy holders at a disadvantage when claiming benefits for damages to their vehicles.
In what may become a landmark case in terms of the punitive measures against Santam, Hollard, Old Mutual and Momentum insurance (all four are respondents in the case); the Competition Commission has signalled in Government Gazette No 7090 of 31 December 2019 that it will ask the court to declare that the insurers have contravened the Competition Act, order the respondents cease with its anti-competitive behaviour, impose a monetary fine, and order the respondents to pay the costs of the proceedings.
A three-year investigation by the Competition Commission that begun on 30 January 2017 found the above-mentioned insurance providers guilty of colluding with windscreen suppliers’ Greg’s Motor Spares, Perfect Glass CC and P.G. Glass Namibia by giving them preferential rights, sole distribution rights and waiving of excess fees. “In addition, some of the agreements provided for a rebate system which allowed the insurance companies to receive rebates in return for having particular proportions of their business referred to the concerned windscreen retailers within a particular period of time”.
The vertical relationship between the insurer and the windscreen suppliers flies in the face of consumer rights, where policy holders could be empowered to opt for cheaper alternatives such as glass suppliers from Previously Disadvantaged Small and Medium Enterprises that have been shut out of the mainstream economy by previously advantaged businesses and White Monopoly Capital.
This unethical practice by the multi-billion-dollar insurance industry is found to have contravened various sections of the Competition Act of 2003, which clearly prohibit such practices.
Section 23 of the Competition Act of 2003 prohibits restrictive practices by outlining that “Agreements between undertakings (business)… which have as their object… the prevention of competition in trade in goods or services in Namibia is prohibited”.
This is exactly what the collusive relationship between insurers and windscreen suppliers does; it limits the entry of new business into windscreen repairs market.
Section 23 (2) (b) prohibits parties in a vertical relationship being an undertaking and its suppliers or customers or both.
There exists a dual relationship in the collusive arrangement hereby outlined in the government gazette:
‘Evidence shows that insurance companies clearly considered the windscreen retailers to be suppliers.’
‘The windscreen suppliers also recognise the supplier-customer relationship that exists with the insurance companies.’
‘The insurance companies act as middlemen between their policy holders and the wind-screen retailers.’
And ‘the insurance companies are not passive bystanders in the relationship with windscreen retailers, with both of them playing a critical role in the value chain relating to the supply of windscreens and related services’.
This evidence which the competition commission intends to present in court may signal the beginning of the end of exploitative practices by insurers.
These insurers have for far too long benefited from the silence of consumers, many who prefer to remain silent than to speak out when being forced to purchase from ‘pre-approved suppliers’ while there are cheaper alternatives on the market.
This practice is, however, not limited to the above-mentioned, which will soon make headlines in mainstream media.
It is also prevalent amongst panel beaters and insurance providers.
Policy holders are often restricted in terms of panel beaters they may choose in the event of accidental damage to their vehicles. This information, however, only becomes relevant once the consumers’ vehicle has been in an accident, partly due to the reluctance of insurance/policy holders to critically analyse the contract they have with their insurer.
Regardless of the fact that policy holders do not inform themselves sufficiently before they sign an insurance contract, the practice of only allowing customers to choose from pre-approved panel-beaters is anti-competitive and should be investigated, addressed and corrected.
Beyond the mainstream white economy, there are equally competent previously disadvantaged panel beaters who can charge more affordable prices due to the lesser overheads.
Renting a workshop in Katutura is cheaper than renting a workshop in town.
Therefore, a panel beater in Katutura is likely to charge lesser than his counterparts in town.
But because the insurers have already colluded with their preferred panel beaters under the guise of pre-approved suppliers, the bargaining power of the insured is eroded and they either take the price the insurer is giving them or opt to fix their car out of pocket, which defeats the purpose of being covered by insurance altogether.
A functioning democracy demands that citizens ask the most daring and frightening questions.
Citizens’ rights and their protection from exploitative business practices are worth interrogating and businesses found guilty of abusing power and limiting the growth and diversification of the economy should be brought to book and fined accordingly in order for them to desist from engaging in such anti-competitive practices.
*Vitalio Angula is a socio-political commentator and independent columnist
2020-01-17 07:46:24 | 4 months ago