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The South African Insurance Association (“SAIA”) represents almost all of the short-term insurance companies in South Africa and is authorised to negotiate on their behalf. The trade association celebrated its centenary in 2007, having served the South African short-term insurance industry for 100 years.
 
 
In the early eighties there were many short-term insurers, flooding a variety of business insurance policy wordings onto the market.  A sensible comparison of benefit between these policies was virtually impossible, which was to the detriment of the small business insurance consumer. In addition, reinsurers were unable to provide capacity based on the perceived inconsistencies contained in the wordings. 
 
Concerned man
 
SAIA responded by introducing a standard business policy - known as "Multimark" - in 1987.  There were no restrictions to amend the standard’cover,  but  - as a result of the sheer bulk of the standard wording - amendments had to be made by endorsement (as opposed to the printed wording) in order to be able to quickly establish the difference/s in a particular policy.
 
 
Few did not accept the Multimark benchmark. Treaty reinsurers’ could require that smaller accounts were placed on the Multimark basis, while corporate accounts could still follow a ‘line by line’ asset wording.
 
 
Over time, Multimark was revised, and today we have the Multimark3 wording available to us.
 
 
On the advice of counsel, the South African Insurance Association decided (in 2007) that the continued, “voetstoots” application of Multimark as the precedent wording of its members, may be contrary to the Competitions Act No 89 of 1998 (“the Act”) as: 
 
  • Section 4(1)(b)(i) of the Act prohibits agreements between, or concerted practices by competitors (regardless of pro-competitive or efficiency benefits);
  • While the use of Multimark is not tantamount to price fixing (as insurers do not jointly agree rates nor rating principles for risk), the Competition Commission can / may take the view that the setting of standard wordings amounts to a fixing of trading conditions (as contemplated) despite that some insurers either do not use the Multimark wording, or apply substantial endorsements thereto;  the basic argument remains that standard wordings inevitably limit customer choice;
  • In other jurisdictions' competition authorities have enacted exemptions that allow the collective negotiation and setting of standard policy wordings, which indicate that Multimark probably contravenes competition law in the absence of such exemption;
  • To achieve exemption it must be demonstrated that Multimark’s absence could destabilize the industry, which would somehow be a "difficult contention to make convincingly". The alternative is to lobby for the Multimark to be included in legislation (but which would limit endorsement, and genuinely restrict competition).  
 
In the light of the above, SAIA has suspended the Multimark Committee – renamed the “Commercial and Technical Committee” – and has in effect withdrawn the Multimark template (to be replaced by the ‘Standard Business Policy Guidelines’). 
 
 
Ironically, until such time as a Multimark (or a Standard Buinsess Policy Guidelines) wording is exempted from competition commission persecution, the suspension of the SAIA endorsement of the wording could  have the effect that there is no longer a formal understanding between insurers as to what would constitute a business policy, rendering years of solid business practise precedent useless.
 
 
Ironically, in order to ensure competition, insurers MUST NOT agree on what constitutes a business policy!
 
 
Multimark was - in all fairness - designed as a platform / template, and not a policy to be meticulously followed. Insurers, while they used Multimark as a precedent, had in fact independently determined their own endorsements to the standard wording by imposing warranties and conditions, premiums and excesses they saw fit. As a result, the Multimark marketed by one insurer compared to that of another - while based on the same template - would be very different in their   implementation, offering of cover, or pricing. 
 
 
Obviously, if one has extensively modified a standard framework’s conditions and wording, it would be misleading to still call it a "Multimark", and this does need to be addressed, but it is  difficult to see how the framework itself could be viewed as potentially anti-competitive, as there is:
  • no compulsion to use the wording, 
  • no prohibition from amending the cover provided, or
  •  no form of premium  / price fixing stipulated.

 Skyline
 
The market needs a benchmark policy wording – as a platformed framework within which to operate - to ensure the ability of the consumer (and his broker) to be able to make a considered comparison of the cover available. 
 
 
Without such a framework, the broker’s laudable duty to provide the client with the information to make an informed decision, will in all probability become laughable. The lack of a framework will add an additional layer of interpretation, uncertainty and dispute, with the broker being first in the line of fire.
 
 
Multimark (or Standard Business Policy Guidelines) must provide the industry with a platformed framework on which to compare like with like, efficiently highlighting departures from a standard. Reverting to pre-Multimark days would be a disaster, as  - in fact – it forms a foundation that stabilises the industry, ensuring  fair competition.
 
 
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