The Namibian Competition Commission (NaCC) last week refused an application for exemption from the Professional Provident Society (PPS) Insurance Company Ltd, Professional Provident Society (PPS) Insurance Company Namibia Ltd, Sanlam Life Namibia and Sanlam Namibia Ltd (the applicants), in terms of section 27 of the Competition Act.
The decision by the NaCC means all brokers and agents that meet the desirable criteria with respect to experience and training should now be allowed to offer PPS products to their clients.
The applicants had sought to be exempted in respect of a marketing agreement, dated September 12, 2011 which regulates, inter alia, the development, sale and distribution of a particular suite of life, disability and dread disease products, issued and administered by Sanlam on behalf of PPS Namibia, and white-labelled as a PPS Namibia product.
“After having considered the applicants’ case in terms of section 27, the Commission found that: the applicants’ marketing agreement does not result in, or likely contribute to improving, or preventing decline in the production or distribution of goods or the provision of services within the market for long-term insurance for professionals as contemplated by section 28(3)(c) of the Act.
“The applicants’ marketing agreement does not result in, or likely contribute to obtaining a benefit for the public, which outweighs or would outweigh the lessening in competition as contemplated by section 28(3)(e) of the Act.
“Accordingly, in terms of section 28(2) read with sections 28(3)(c) and (e) of the Act, there are no exceptional or compelling reasons of public policy for the granting of the exemption,” read a statement by the NaCC’s restrictive business practices directorate.
The NaCC statement added that the applicants are required to take all necessary and proactive steps to ensure that the marketing agreement shall be in a position to cease by latest November 4 and that the applicants are furthermore required to as soon as feasible – but in any event no later than May 17 – cease writing new policies under the marketing agreement, but continue to perform the balance of their rights and obligations under the marketing agreement until November 4.
The Commission’s decision was published in the Government Gazette on April 18, 2017.
From a historical perspective the relationship between PPS and Sanlam dates back many years. In fact, until a couple of years ago, all PPS products were administered by Sanlam, while the agreement giving Sanlam the exclusive right to market PPS products also dates to that time.
However, today PPS administers its own products independently of Sanlam, except for a few products that clients purchased many years ago, which will continue to be administered by Sanlam until these products reach their natural end of life, either by expiry, cancellation or the payment of a benefit.
By its very nature, PPS products are intended only for people with professional qualifications, and the cancellation of the exclusive marketing agreement would likely not affect the nature of PPS’s product offering.
Also, PPS is the last remaining insurer that operates on a mutual basis, where all policyholders share in the profit of the company as if they are shareholders. By virtue of this fact, policyholders have shared in significant profit shares in the past, a feature that is not available on a normal insurance policy issued by entities other than PPS.
According to a local insurance specialist, who prefers anonymity, in recent years, other insurers launched competitively priced products for professionals, yet these do not have the profit-sharing arrangement of PPS products.
“I must voice a note of caution though. Given the complex nature of PPS products, any agent or broker wanting to sell these products must be properly experienced and properly trained in these products. It would therefore make sense that there would need to be a phase-in process for non-Sanlam agents and brokers to be trained and accredited to sell the product.
“As a professional wanting to acquire a PPS product, talk to an experienced and qualified financial advisor who will do a proper analysis of your needs before offering a product to you,” the insurance specialist advised.