Dear Anna Wu, Chairperson of the Hong Kong Competition Commission:
Two weeks ago, I sent you a letter to draw your attention to Section 3.2, Paragraph (a) of the Professional Insurance Brokers Associations’ February 2011 Position Paper on Insurance Brokerage Commission.
PIBA stated that most of its member companies were opposed to disclosing the exact amount of commissions because it “would result in cut-throat competitions”.
A broker’s commission is nothing more than the price the consumer is paying for insurance brokerage services.
One of your staff responded to my letter, stating:
“Based on the information provided, the fact that the Professional Insurance Brokers Association has published its views on the extent to which brokerage commissions should be disclosed to customers does not in itself suggest cartel conduct or other anti-competitive practices in the relevant markets and will not raise competition concerns.”
Sorry, but I think the Competition Commission is dead wrong. Please explain how there are no competition concerns raised when an association of brokers publicly states that they are opposed to full commission disclosure precisely because it would result in price competition?
PIBA members are essentially saying that they want to deprive consumers of cheaper insurance brokerage services, i.e., to keep the price of those services artificially inflated. They want to make it unnecessarily difficult for consumers to be able to locate the broker who is offering the best price, or to even know the price at all.
When all brokers simultaneously hide the price of their services, then they can all keep the price jacked up at the current obscene levels.
The First Conduct Rule of the Competition Ordinance “prohibits undertakings from making or giving effect to agreements or decisions or engaging in concerted practices that have as their object or effect the prevention, restriction or distortion of competition in Hong Kong.”
I think it is accurate to say that brokers are engaging in a concerted practice of not fully disclosing commissions, which they admit has the intended effect of restricting price competition.
If the Hong Kong Competition Commission does not think that cartel activity in the insurance brokerage industry should be on its radar, then please note that just yesterday, the Competition Commission of Singapore (CCS) issued a “Proposed Infringement Decision Against 10 Financial Advisory Companies for Pressurising Competing Life Insurance Offer to be Withdrawn from the Market“.
I wrote about this very issue one year ago, in a blog post titled, “Singapore Financial Advisers Flout Competition Law and Cheat Consumers out of Cheaper Insurance“. Please take a look at it.
I would appreciate a response from the Hong Kong Competition Commission explaining how concerted non-disclosure of insurance brokerage commissions does “not raise competition concerns”, especially when PIBA members admit that a purpose of non-disclosure is to avoid “cut-throat competitions”.