U.S. multinational businesses are increasingly seeking opportunities in new regions of the world, expanding outside of the United States and continental Europe into sub-Saharan Africa, Asia and Latin America. As their operations outside of the United States grow, however, multinationals face a wide range of risks to their employees and property.
A global controlled master program offers an integrated insurance solution, ensuring companies have the local admitted insurance they need along with a broad, global policy that provides consistency across operations as well as supplemental protection to address gaps in terms and conditions in the local policies. While the insurance provided under a global controlled master program is critical for companies with multinational operations, an integrated services solution is no less important.
An integrated services solution ensures that all elements of the controlled master program – from policy execution to claims handling to loss control – are compliant and work together so that a business reaps the full benefit of the insurance provided under the controlled master program. The lack of a well-coordinated services solution can translate into lapses in insurance, delayed claims payments and higher premium costs.
Africa and Asia Trade Exploding
International trade has been soaring in recent years, with U.S. exports more than tripling to $2.3 trillion in 2013, up from nearly $700 billion in 2009, according to the U.S. Commerce Department.
Noting that 95 percent of the world’s consumers live outside the United States, the Commerce Department has been encouraging international growth, especially in fast-growing markets in places like Africa and Asia.
As part of this push, the Commerce Department is expanding its own overseas resources to help businesses navigate global markets with new offices in countries such as Burma, Angola, Tanzania, Ethiopia and Mozambique, and additional staff in Europe, the Middle East and the Western Hemisphere.
As they take advantage of new opportunities in emerging regions, as well as those in more established centers, multinational businesses may need a variety of insurance products and services, including international business travel, foreign voluntary workers’ compensation and global property. While the insurance policies must be integrated to ensure that all of an organization’s operations are insured, the service component of these programs should also be integrated so that companies receive the full value of their insurance.
Insurance protection such as business travel, foreign voluntary workers’ compensation and global property are often sold and serviced by different departments within an insurance company. An integrated team will be able to coordinate the service for all types of insurance across departmental lines and provide loss and claims reports to the agent or broker.
An integrated service solution also is critical for businesses with operations in foreign countries lacking a well-developed insurance and risk management infrastructure.
Some agents, brokers and insurers are unfamiliar with foreign markets and may have little experience handling foreign claims. An insurer with an integrated service team can help agents and brokers make connections with local, independent agents and can provide multinationals with a highly efficient and effective level of service.
Start with Policy Execution
The need for integrated services begins with policy execution.
Under a global controlled master program, businesses buy a mix of admitted local policies in the countries where they have operations to ensure that they have the local insurance they need and are compliant with country regulations. The global master policy also coordinates the admitted and non-admitted insurance policies to help ensure consistency of insurance and address gaps in local policy terms and conditions.
Each country, however, has its own regulations related to the placement of insurance. In many countries in Asia, for instance, regulators require that a policy cannot be incepted until premium payment is received by the insurer, something known as “cash before cover.”
In Japan, local policies must be arranged through a local broker, and in Brazil regulators require that insurance policies be executed within a 15-day timeframe.
In each country, businesses also face different types of risks, and the local markets offer unique kinds of insurance designed to meet the particular needs of businesses in those locations.
An insurer with a network of owned offices and relationships with affiliate partners and correspondent brokers around the world can ensure compliance with local regulations and provide advice on the risk exposures in each country.
Claims Handling Know-How
Integrated service also makes a difference when it comes to handling claims. Before any claims payments can be made, local experts may need to visit the site of an incident.
A cause and origin expert, for instance, may be required to investigate a fire at a company’s overseas facility. But if the facility is in a remote location, the expert may not be able to get to the scene for many days.
An insurer with a claims service team experienced in handling foreign claims has relationships with professionals who will be able to get to the site of the incident quickly and get the claim resolved effectively.
Integrated service is also crucial for coordinating insurance under the local and global policies. Terms and conditions under a local policy can often be very different from those under the company’s global policy and ultimately could make a difference in the final claims payment.
Consider, for instance, the case of a shipment of sunglasses stolen from a warehouse in the Netherlands when someone inadvertently left the bay door open overnight. Under the local policy, thefts were insured only when there were signs of forced entry. In this case there were none. The global policy, however, did not require that there be signs of forced entry and responded to the loss.
The two policies also may value the shipment differently. The local policy might pay only the cash value of the glasses while the global policy might value them at their selling price, which could be considerably higher.
Loss Control Is the Final Piece
Businesses with operations in foreign countries rely on loss control experts to help them reduce the risk of a loss and manage their insurance costs. Insurers that do not have their own loss control engineers on staff, however, may have to rely on outside experts who may be unable to provide ongoing oversight of a business’s operations. An insurer that has its own engineers on staff at locations around the world can monitor ongoing situations, make multiple visits to follow up on areas of concern and provide reports to the agent, broker and business.
As multinational companies expand into new regions of the world, such as India, Brazil and China, they have to manage the risks to their employees and property. A global controlled master program may provide broad insurance protection and help meet local insurance requirements, while a well-integrated service solution can help capture the value inherent in a global controlled master program.
The Bottom Line
The bottom line: An integrated service solution is critical for a multinational company with a global controlled master program involving the placement of multiple policies in a number of different local insurance markets.
In addition, with people, property and business relationships worldwide, a loss thousands of miles away from the home office may require the presence of claims experts on the ground as well as a solid understanding of local laws and regulations. An insurer with owned offices and affiliated partners around the world will have the ability to provide fast and effective claims handling.
In addition, an insurer that has its own loss control engineers on staff may also provide value by helping businesses mitigate risk, thereby reducing potential losses.
Companies with an international presence may already recognize that the value of a well-designed integrated global controlled master program is too important to ignore, but an integrated service solution is just as important.