The Competition and Fair Trading Commission (CFTC) has said the insurance industry in Malawi has a high market concentration, a situation which signifies that market power in the industry can be abused.
CFTC Director of Mergers and Acquisitions, Richard Chiputula presenting a paper in Mangochi at the 2016 Annual Conference for the Insurance Institute of Malawi, noted that both general and life insurance markets in the country are concentrated.
“The general insurance market is concentrated with a ratio of 69 percent for the top three companies. This means that the market is prone to competition distortion. The life insurance market segment is principally a duopoly with Old Mutual Life claiming 53.2 percent of the market share and NICO Life accounting for 44.9 percent of the market.
“Market concentration is an important factor in competition analysis because it influences the conduct of market players. In a concentrated market, it becomes easier for market players to coordinate their business strategies and avoid competing with each other,” said Chiputula.
Chiputula added that the level of concentration in the insurance industry is the reason why the CFTC takes a keen interest in monitoring markets that have high concentration like the insurance industry.
Under Section 42 of the Competition and Fair Trading Act, the CFTC has powers to monitor concentration of economic power.
Commenting during the annual conference that ran from 18th to 20th August 2016, CFTC Director of Consumer Welfare and Education, Lewis Kulisewa said it was important to note that the CFTA promotes competition to ensure consumer welfare.
“Apart from regulating anti-competitive business practices, the CFTA also regulates conducts which have direct negative effects on consumers,” said Kulisewa.
The CFTA, under Section 43 specifically provides against unfair trading practices including misleading advertising, misleading conduct, offering of gifts and prizes with no intention of supplying them, unconscionable conduct and supply of harmful products.