In early June 2015 the Competition Authority of Kenya fined the Association of Kenya Reinsurers about R91 000 for setting minimum premium rates for insurance companies tendering to provide group life cover to the National Intelligence Service employees.
The fixing of minimum premium rates have been going on for years in Kenya. The reinsurers claim these are necessary to see that insurance companies remain healthy and are able to pay claims. The minimum premiums are actuarially determined by the reinsurers but set by the governmental Insurance Regulatory Authority. The reinsurers have called for constructive discussions between the two government authorities to resolve the issue.
Although the Kenyan reinsurers and the insurance regulator claim that undercutting premium poses a serious threat to the profitability of insurers, this kind of argument is a non-starter in South Africa. No matter how sensible the commercial considerations are said to be, it is no defence to a complaint about price-fixing by competitors in terms of the South African Competition Act.
Although this is probably well understood in the South African insurance industry, it is good for us all to be reminded that any kind of cartel behaviour will not be tolerated by competition authorities. In addition, the competition authorities in East Africa tend to have cross-border influence and anyone with insurance business in Kenya as well as elsewhere must see that they do nothing anti-competitive in any of the jurisdictions in which they operate.