Businesses are looking for increased cost-efficiency, consistency and transparency and there is much to be gained from bringing general insurance and employee benefits teams together to work on global solutions.
Employee benefits and general insurance have long been kept separate. The service companies are often unconnected, and the people looking after the two areas are very different – the risk and insurance manager and human resources/benefits manager.
But there are many advantages in having a closer relationship between the two and in taking a global approach to benefits programmes.
Global insurance programmes have been around for a long time and the benefits of such an approach are well known to risk and insurance practitioners.
These include centralising insurance buying, providing control, enhanced coverage, cost savings and consistency of coverage. For employee benefits, it is all about local policies.
However, there is a trend emerging for global benefits management, where similar advantages around cost, compliance, transparency and control are achievable.
“The benefits of global programmes for non-employee benefits risks still apply to employee benefits programmes but are achieved in a different way,” says Lee Thurston, Global Benefits Director at JLT Employee Benefits.
“Rather than having a global plan, a client may be looking to buy, for example, stand-alone life insurance in a number of countries around the world.
They will look for an insurer that has representation and an underwriting capability in those countries, and try to buy the individual policies with the one underwriter.
“Although at their heart the plans are local policies, we’re finding that there is a growing preference to place policies with insurers that have a regional or global presence where they might link the underwriting and pricing of policies – a collection of local policies placed with one insurer, and potentially one premium rate. There has been more traction around some of these regional plans, but they are still local policies and not global plans.”
Global benefits management, he says, can allow a client to achieve transparency over costs, compliance with local legislation, visibility of the benefits provided, improvements in terms and conditions, and control of the employee benefits programme.
He explains that boards are increasingly recognising that similar benefits from global insurance programmes are achievable in employee benefits.
“This is where JLT is getting traction in talking to those multinationals around some of the strategies they have, and helping them to achieve their objectives. So we have established a global benefits strategy where we use our network to deliver that advice, insurance procurement and administration.”
The captive option
Global employee benefits commonly use a facility known as multinational pooling, where policies are bought from a multinational pooling network, which returns any surplus (after all expenses, including fees, claims, commissions and reinsurance costs have been subtracted) as a dividend to the parent company.
Thurston says, in the past three to five years, there has been the realisation that there isn’t a lot of difference between a general insurance policy and an employee benefits policy and, where a company has a captive insurance company, it may make sense to fund employee benefits through the captive.
“It is not a trend as yet, but a number of large multinationals are funding employee benefits through a captive, and there is an increasing amount of discussion and interest, not least because of the advantages for the captive such as diversification and better use of capital.
At JLT, our captive teams are working closely with employee benefits teams to talk to insurance managers and are getting much more traction in this area,” he says.
One of the challenges is to encourage greater collaboration between risk and insurance and human resources teams who have not traditionally worked together. They tend to have very defined roles and responsibilities, but Thurston believes that there is much to be gained from greater co-operation.
“Both sides need to be talking together more to ensure that they are leveraging the best that the consulting community and carrier markets can offer them, whether that is in terms of service levels, terms and conditions, ideas, use of technology, or funding methodologies.
It is beginning to happen but it is not common, and is not a trend. With the more forward-thinking global players, HR, insurance managers and CFOs are talking together about the issues.
“But generally there is a lot more work to be done to bring them all together,” he explains. One of the benefits of greater co-operation is that it makes it easier to identify overlapping coverages and duplication of premiums.
For example, a personal accident policy will have a death benefit element, which may duplicate the cover provided in a life insurance policy.
Wendie Brackstone, Head of Global Service Team at JLT Specialty, says there can be advantages in collaboration between the two disciplines.
She says it is more decentralised on the employee benefits side simply because HR teams themselves are more likely to be decentralised as they focus on their immediate local employees, whereas risk and insurance managers are more likely to be part of a centralised function that is comfortable seeing things as a global risk exposure.
Their organisation will have considered risk exposure as part of their wider corporate governance responsibilities and how business activities such as moving stock/ people between countries might impact the business objectives.
“There are well-established protocols and practices for dealing with non-employee benefits global programmes,” she says.
“The benefits in terms of compliance, efficiency, cost savings, and so on, could equally be applied to the employee benefits side. Everything that is good about non-employee benefits programmes can also be applied to employee benefits programmes.”
For further information, please contact Richard Roper, Managing Director of Benefit Solutions Asia at Richard_Roper@jltasia.com