Market scan by NMa gives insight into competition risks in funeral insurance market

The market for funeral insurance has an average to high risk of problems with competition law, according to a market scan published today by the Netherlands Competition Authority (NMa). The NMa says the analysis also indicates that a number of problems not related to competition law can be prevented by introducing more transparency in the market. The market scan gives market parties clarity on what is permitted and prohibited by competition law and which complaints they can submit to the NMa.

The insurance market is an important field of attention for the NMa and is one of the top priorities on the NMa's 2008 agenda. Using the market scan the NMa was able to broaden its knowledge of this market. On the basis of various market indicators the NMa ascertained in the analysis that the risk of competition problems on the market for funeral insurance (that pays out in kind) is average to high. In particular the high degree of concentration (a small number of parties serve a large part of the market) and impediments for new parties entering the market are signs of a limited degree of competition in this market.

Possible violations of the Competition Act
A number of concrete problems are analysed in the publication, on the basis of tip-offs and signals received by the NMa and a survey among funeral directors. This analysis focuses on the market for funeral insurance that pays out in kind. Where necessary, activities on other markets, such as the market for funeral arrangements, were included in the analysis. After all it is possible that insurers with a strong position on the market for funeral insurance that pays out in kind are looking to expand their position in adjoining markets. The analysis describes each problem in which competition might be limited. For instance an individual entrepreneur with a funeral parlour may in principle himself decide whom he allows entry to the parlour. If various funeral parlours in a region make agreements however to limit entry, this can be in violation of the Competition Act. In addition, funeral insurers that pay out in kind often also own funeral parlours and crematoria and in principle they are permitted to charge different prices to different funeral directors. If the insurer however has a dominant position in the area of funeral services in a certain region, it may be in violation of the Competition Act if their own funeral directors are charged lower tariffs than independent companies.

The market scan clarifies which factors are important in assessing a problem. The NMa can only take enforcing action if companies act in violation of the Competition Act by forming cartels or abusing a dominant position. This publication gives consumers and businesses a resource for reporting concrete indications of violation of the Competition Act to the NMa. Where necessary the NMa will take action.

Other factors that disrupt the functioning of the market
In addition to possible problems in the area of competition, the NMa also picks up on other factors that can disrupt proper market functioning. For instance, additional payments are experienced as the greatest problem in the sector. Surviving relatives often have to unexpectedly pay high additional amounts, even though they thought that the entire funeral would be reimbursed by the insurer. It is possible that a lack of transparency and communication, as well as different interpretations of policy terms and conditions, is the reason behind unexpected high additional payments for funerals. More transparency in the market can be achieved if funeral insurers communicate more clearly to consumers what exactly they are insured for and for which facilities customers must pay extra. The NMa has called on the sector to achieve this transparency.

The NMa will work closely with other competition authorities, like the Netherlands Authority for the Financial Markets (AFM), and policymakers, like the ministry of Finance, to stimulate market functioning and competition within the funeral sector. The NMa will maintain close contact with the AFM, for instance, to see whether and to what extent the AFM can contribute to improved transparency.

Suspicion of a violation
This market scan indicates what kind of tip-offs, indications and complaints on funeral insurers or funeral businesses can prompt an investigation into violation of the Competition Act. This can be reported in the following ways:
• Consumers can contact ConsuWijzer, at +31 (0) 88 - 070 70 70 (national rate)
• Entrepreneurs can report complaints and signs of possible violations via the Business counter, at +31 (0) 800 0231885 or info [at] acm [punt] nl (info[at]acm[dot]nl).
• Businesses and natural persons who can be fined and who are themselves involved in a violation of the Competition Act can submit a request for leniency to the NMa. On the basis of this they can secure immunity or reduction of fines ('leniency') in exchange for information about these violations. The NMa has drawn up guidelines for this. The NMa's Leniency Office can be reached at +31 (0)70 330 1710, fax +31 (0)70 330 1700 or email: clementie [at] acm [punt] nl (clementie[at]acm[dot]nl).

Possible violations of the Competition Act

A number of concrete problems are analysed in the publication, on the basis of tip-offs and signals received by the NMa and a survey among funeral directors. This analysis focuses on the market for funeral insurance that pays out in kind. Where necessary, activities on other markets, such as the market for funeral arrangements, were included in the analysis. After all it is possible that insurers with a strong position on the market for funeral insurance that pays out in kind are looking to expand their position in adjoining markets. The analysis describes each problem in which competition might be limited. For instance an individual entrepreneur with a funeral parlour may in principle himself decide whom he allows entry to the parlour. If various funeral parlours in a region make agreements however to limit entry, this can be in violation of the Competition Act. In addition, funeral insurers that pay out in kind often also own funeral parlours and crematoria and in principle they are permitted to charge different prices to different funeral directors. If the insurer however has a dominant position in the area of funeral services in a certain region, it may be in violation of the Competition Act if their own funeral directors are charged lower tariffs than independent companies.

The market scan clarifies which factors are important in assessing a problem. The NMa can only take enforcing action if companies act in violation of the Competition Act by forming cartels or abusing a dominant position. This publication gives consumers and businesses a resource for reporting concrete indications of violation of the Competition Act to the NMa. Where necessary the NMa will take action.

Other factors that disrupt the functioning of the market

In addition to possible problems in the area of competition, the NMa also picks up on other factors that can disrupt proper market functioning. For instance, additional payments are experienced as the greatest problem in the sector. Surviving relatives often have to unexpectedly pay high additional amounts, even though they thought that the entire funeral would be reimbursed by the insurer. It is possible that a lack of transparency and communication, as well as different interpretations of policy terms and conditions, is the reason behind unexpected high additional payments for funerals. More transparency in the market can be achieved if funeral insurers communicate more clearly to consumers what exactly they are insured for and for which facilities customers must pay extra. The NMa has called on the sector to achieve this transparency.

The NMa will work closely with other competition authorities, like the Netherlands Authority for the Financial Markets (AFM), and policymakers, like the ministry of Finance, to stimulate market functioning and competition within the funeral sector. The NMa will maintain close contact with the AFM, for instance, to see whether and to what extent the AFM can contribute to improved transparency.

Suspicion of a violation

This market scan indicates what kind of tip-offs, indications and complaints on funeral insurers or funeral businesses can prompt an investigation into violation of the Competition Act. This can be reported in the following ways:

Consumers can contact ConsuWijzer, at +31 (0) 88 - 070 70 70 (national rate)
Entrepreneurs can report complaints and signs of possible violations via the Business counter, at +31 (0) 800 0231885 or info [at] acm [punt] nl (info[at]acm[dot]nl).
Businesses and natural persons who can be fined and who are themselves involved in a violation of the Competition Act can submit a request for leniency to the NMa. On the basis of this they can secure immunity or reduction of fines ('leniency') in exchange for information about these violations. The NMa has drawn up guidelines for this. The NMa's Leniency Office can be reached at +31 (0)70 330 1710, fax +31 (0)70 330 1700 or email: clementie [at] acm [punt] nl (clementie[at]acm[dot]nl).