Competition Commission must investigate Education Malaysia Global Services for allowing anti-competitive behaviour and price fixing in the medical insurance market for foreign students
On the 6th of September, 2013, the Competition Commission issued a financial penalty of RM10 million each on MAS and Air Asia for violating Section 4(2)(b) of the Competition Act 2010 which makes it an infringement for companies operating in the same markets to share information.[1]
On the 11th of September, 2013, the Competition Commission issued a warning to associations not to collude in fixing price increases among its members as this contravenes Section 4 of the Competition Act 2010.
According to the Competition Commission, Section 4 of the Competition Act 2010 prohibits enterprises, including associations, from fixing, directly or indirectly a purchase or selling price or any other trading conditions for goods and services.[2]
But this is exactly what Education Malaysia Global Services (EMGS) has done by allowing one insurance company – AXA Affin General Insurance – to be the only player in the market in the provision of mandatory medical insurance to foreign students at fixed prices.
EMGS CEO Mohd Yazid Abd Hamid was quoted as saying that Axa-Affin was ultimately chosen because it offered the lowest price among a dozen companies in an open tender.[3]
Appendix 1 shows AXA-Affin’s medical insurance policy for foreign students in 2008 while Appendix 2 shows AXA-Affin’s medical insurance policy for foreign students provided under EMGS. If we compare the 2008 policy with the basic (Silver) EMGS policy, we would find that the schedule of benefits for the two policies are almost the same. The only differences are:
(i) Government Hospital Daily Cash allowance has been reduced from RM80 under the 2008 plan to RM60 in the current EMGS plan
(ii) Medical Report Fees Claim has decreased from RM80 in 2008 to RM60 in the current EMGS plan
(iii) Accidental Death and Disablement claim has decreased from RM30,000 in 2008 to RM20,000 in the current EMGS plan
(iv) Emergency Medical Evacuation and Repatriation has increased from RM20,000 in 2008 to RM100,000 in the current EMGS plan
The AXA plan in 2008 charged an annual premium of RM280 while the EMGS Silver Plan charges RM500 a year, an almost 80% difference for more or less the same level of coverage. This is despite the fact that AXA-Affin does not have to pay a commission to insurance agents because these policies are channelled directly via EMGS. Unless of course, EMGS is also getting a share of the insurance premiums!
CEO Mohd Yazid also said that if any insurance companies could provide lower quotations to EMGS, he would bring it to the board for further consideration. This kind of statement is next to useless since AXA-Affin has already signed a 4 year contract with EMGS to provide this medical insurance. Furthermore, this does not allow for open market competition between different insurance companies to compete for customers. Imagine if MAS or Air Asia had to submit a bid to a regulatory board every time it wanted to change or lower its prices!
In addition, I have heard that the service being provided by AXA-Affin in terms of processing claims is less satisfactory compared to that being provided by individual insurance agents under the previous system. Before the market was monopolized by AXA-Affin, universities and colleges could change insurance agents if the level of service was unsatisfactory. Now, this option is no longer available. So, not only is AXA-Affin charging a higher price for more or less the same level of insurance coverage, the service level is also not as satisfactory compared to before.
Mr Pee Che Yong, an insurance agent whose income and livelihood has been affected by this policy, filed a complaint with the Competition Commission on Feb 22, 2013. He has yet to receive an official reply although its CEO, Shila Dorai Raj, has said, in a press report, that it conducted a preliminary assessment on the matter.
I call upon the Competition Commission to undertake a comprehensive investigation into the monopolization of the provision of medical insurance to foreign students by AXA-Affin. Specifically, I call upon the Competition Commission to:
(i) Investigate EMGS and AXA-Affin for infringements under Section 4 of the Competition Act
(ii) Investigate the process of the ‘open tender’ conducted by EMGS and find out why the winning bid was 80% higher in price than a similar policy sold by AXA-Affin in 2008
(iii) Investigate if EMGS profits in any manner by giving AXA-Affin this monopoly
