Ten ways to sell the global programme to subsidiaries

One of the hardest jobs for a risk or insurance manager when it comes to a global insurance programme is selling the concept to subsidiaries and operating units. The news of a centralised, unified insurance programme may be music to the ears of a group finance director, and indeed group risk manager, but may not be universally welcomed, especially by some local operations that may have been used to dealing with their own insurances for a very long time.

And internal politics may be the deciding factor as to the success of failure of the programme, so it is important that time and effort is spent on ensuring that everyone in the group knows what their role is, as well as understanding the importance of central control.

So, here are ten ways to sell the global programme to subsidiaries:

1. A global programme does not mean compromising local compliance
Local requirements for insurance will not be ignored under a global insurance programme. Indeed, it will ensure that local compliance is paramount. Local operations will be aware of the need to comply with local legal and regulatory requirements or face certain penalties. So it will be important to stress that local compliance will be integrated into the multinational programme. This means working with local operations to ensure there is full compliance with regard to compulsory insurances, tariffs and non-admitted insurance.

2. Pricing will be competitive with the local market
It is vital that the programme ensures price competitiveness with the local insurance market in order to avoid complaints from local operations about the programme increasing costs. Local operations may have had long relationships with local insurers who may be prepared to provide very competitive and favourable rates and terms and conditions, which the local operation will be very unwilling to give up. However, the bulk buying power of the global programme should balance out any benefits from long relationships with local insurers, or deliberate rate-cutting by local insurers to retain the business.

3. Retentions can be kept at a reasonable level
The nature of a global programme means that while the group retention can be set a reasonably high level, local retentions can be kept lower. In particular, the captive can be used to manage all the local retentions, allowing retentions to be set appropriately.

4. Risk management and loss prevention can be rewarded immediately
One of the complaints of local units, as of groups in general, is that the cost of implementing risk management and loss prevention measures is rarely reflected in the premium, and certainly not immediately. Often, it will only be partially reflected if the claims figures during an extended period show a reduction. Within a global programme, there is the ability to adjust premium allocation according to the implementation of such measures. Where local units commit to group risk management strategies, or implement their own loss prevention measures, these can be acknowledged and rewarded in terms of either lower premiums or lower retentions.

5. The programme can bring additional covers
One of the benefits of a multinational programme is that it can provide broader coverage in terms of policy wordings than the local market can provide, with better terms and conditions, as well as providing coverage for risks that may not be available in the local market. This is particularly important in winning over the local operations to the programme.

6. Higher limits will be available under the global programme
Another important benefit that will be popular with local managers is the ability to have much higher limits for the programme than would be achievable in the local market.

7. Security of insurers can be guaranteed (ish)
In some territories there may be an issue with the required financial security of insurers in the local market. The solvency of local insurers may be in question, and the ability of the programme to work with highly-rated, global players can hopefully remove any concerns about security of insurers and their ability to pay claims in full and in a timely manner, in the event of a loss.

8. Long-term stability not short-term gain
The long-term nature of many multinational insurance programmes is one of the great benefits, so any long-term arrangements that a subsidiary may have, and be required to give up, will be compensated for by the long-term nature of the programme. The success or failure of a programme may come down to the relationship between the multinational and the multinational insurer, and there are clear benefits for both in looking at the relationship over a long period, which can bring stability to both the group’s insurance arrangements and the subsidiaries’ arrangements.

9. It will keep the local directors safe and protected
As any risk manager knows, perhaps the most important insurance risk to ensure full coverage for, is directors and officers (D&O) liability. Local directors want to know that they are covered with appropriate limits, wide terms and conditions, and with an insurer able to pay claims. D&O in the past was often not available in local markets, or not at the level required. Even where it is, many groups like to keep their local directors happy by ensuring that all directors and officers in the group have the same level of protection, regardless of where they were in the world. This is only realistically achievable with a global insurance programme.

10. More free time (or more time for the day job)
Insurance purchasing is time consuming and often local operations will have designated the function to someone with a full-time day job. Explain how much simpler their role will be when it is handled in a centrally-controlled global programme. One less thing for them to have to worry about.