Insurance association warns against price fixing
Insurance Association of Malawi (IAM), a local umbrella body for the country’s insurance firms, has asked all stakeholders to disregard any representations alleging fixing of premiums.
The move by the industry abides to the country’s Competition and Fair Trading Act of 1998, which speaks against price fixing.
IAM said yesterday it does not fix prices for insurance premiums, stressing that there are neither minimum nor maximum prices. It also said there are no recommended prices for insurance premiums prevailing in Malawi under the guise of the association.
In 2011, the insurance industry announced a more than 130 percent increase on minibus premiums effective 2012, which was later withdrawn after negotiations with stakeholders, including government and Reserve Bank of Malawi (RBM).
In the wake of developments in the insurance industry, Competition and Fair Trading Commission (CFTC) last year determined that IAM was engaged in setting and recommending premium rates to its members contrary to the Competition and Fair Trading Act.
According to a letter dated November 5 2014 signed by CFTC executive director Charlotte Malonda, the commission decided that IAM committed an offence and was liable to prosecution for imposition of a fine of K500 000 or an amount equivalent to the financial benefit generated by the offence and to five years imprisonment as provided by the Act.
However, the commission decided to exercise leniency and resolved not to commit IAM to court of law for imposition of sanctions.
Regardless of the leniency, CFTC, however, decided that the association be issued with a cease and desist order, make a public withdrawal of any premium rates that maybe in force and engage the registrar of financial institutions to sensitise it to the provisions of the Competition and Fair Trading Act.
In an earlier interview, Nico General Insurance Company Limited chief executive officer Eric Chapola said it is unfortunate that CFTC thinks the insurance industry is doing business not in line with competition laws.
“I would rather they understand what we do for them to understand our business. I think they don’t understand. They are making decisions that they are not aware of,” he said in Blantyre on the sidelines of a brokers’ dinner and dance.
Nico General, a subsidiary of financial services group Nico Holdings Limited, controls slightly a third of the insurance industry market share.
