While commercial insurance is widely used to effectively manage risk and satisfy contractual obligations, most coverages are not considered mandatory. One virtually global exception is auto liability insurance. For any complex multinational organisation, keeping track of auto liability policies around the world can quickly become a difficult and cumbersome task. Each country has unique documentation needs, specific processes with local regulators and its own required limits; risk managers could potentially lose sight of what coverage each local subsidiary has purchased and the company’s global spend.
A multinational auto liability programme not only provides for centralised control over a company’s worldwide auto insurance placements, but also provides visibility into a company’s exposure, coverage and spend worldwide. While a global auto programme may not be appropriate for every client, it can be particularly effective for a company with an established risk management team that makes centralised insurance purchasing decisions for the company on a worldwide basis. Further, a company with a large fleet of business vehicles may benefit from the economies of scale provided by such a programme.
The foremost benefit of a multinational auto liability programme is the control it offers. By managing the programme centrally, a risk manager can be confident that the company is compliantly placing this coverage everywhere it is legally required, and have access to global claims data and policy wordings.
This central control also facilitates decisions on terms and conditions. For example, most territories do not require auto physical damage coverage. Thus, the decision could be made to retain that risk, while placing the required auto liability coverage via the multinational programme. Similarly, a company that includes a captive as part of its overall risk management strategy could utilise the captive to retain risk under the multinational auto liability programme and still be able to show evidence of coverage.
A final key benefit of a centralised programme is having direct insight into a company’s total global spend on coverage. While it is often a challenge for a company to identify and track insurance costs across various countries, this information is crucial as more companies look to their risk management teams to identify cost-saving opportunities.
Even with optimal design and management, multinational auto liability programmes are not without their complexities. Timing becomes a key challenge due to the legally required documentation for each territory. To execute on the numerous unique regulatory requirements, coverage must be agreed with enough time for the insurer and broker to release instructions and issue the individual local policies and other documentation.
A less obvious but perhaps more demanding challenge is the data compilation and monitoring involved in managing these programmes. Companies with large fleets are constantly adding and removing vehicles throughout the year. Collecting accurate vehicle counts from local entities for the programme renewal can be time-consuming and difficult to organise.
Effective programme implementation
Given the challenges, brokers and clients may view the effective and efficient management of multinational auto liability programmes as a daunting task. With the right insurance partner, frustrations can be eased and these programmes can be managed appropriately.
- An agreed timeline
The best-executed multinational programmes rely on preparation and alignment across all parties – client, broker, and insurer. This starts by engaging early and agreeing on timelines. For example, it is vital for each company to have an appropriate inception/renewal date and stakeholders should work together to select a time of year that does not interfere with other important dates or busy times for the company (for example, if a company typically shuts down for the last two weeks of each year, a 1 January inception date may cause unnecessary challenges and delays). Furthermore, an early bind order – targeted 30 days prior to inception – allows the insurer to get policies issued and invoiced promptly, with adequate time to align on local requirements and avoid issues with programme implementation.
- Reliable data
The compilation of accurate data can be exceedingly challenging for a centrally managed multinational programme. This is particularly true for auto liability programmes, in which the vehicle fleets of local entities are constantly changing. Vehicle counts used for risk assessment and quoting often need to be ‘trued up’ at the time of policy issuance and invoicing (or via an audit at the end of the policy period). Some industry brokers have been working on developing technological solutions to alleviate some of the challenges with fleet tracking and real-time data access.
- An achievable perimeter
Instead of targeting all countries and chasing the data and specificities from each of them, it’s key at the beginning to work on a selected number of countries to ensure a successful implementation with a solid programme and enough volume.
Rather than having each local entity place coverage based on its own risk appetite, a centralised programme allows the risk manager, in collaboration with the broker and insurer, to choose a consistent approach across all territories. This establishes common limits, deductibles and coverage, while also ensuring compliance with local regulations.
Successful multinational programme implementation begins with appropriately managing expectations and making sure that all parties have a clear understanding of their roles and responsibilities. A key part of that process is effective and proactive communication among the client, broker and insurer – and their local counterparts. This communication, not only during implementation but also throughout the life of the programme, is crucial for meeting each client’s unique requirements and staying current with any changes in those needs.
Auto liability is a legally required coverage in most territories around the world. However, an increasing number of companies have begun transitioning their multinational auto liability programmes away from traditional risk transfer as they look to more creative risk management strategies and seek to retain more of their own risk. In many cases, these programmes are a good fit for captive utilisation. While a captive structure provides an opportunity to retain the risk and lower costs, it also provides a mechanism with which to ensure compliance with local regulators and keep each local entity’s retention at a manageable level.
Whether obtaining traditional risk transfer coverage or utilising a captive programme, there is no doubt that structuring and implementing a multinational auto liability programme can be a complex and challenging process, involving multiple countries and stakeholders. However, the benefits afforded through centralised management can help streamline processes, align timelines and enhance the overall consistency of the programme.
Contributed by Abbe Maas, US multinational zonal lead, midwest, AIG; and Jennifer Urso, US head of national accounts, foreign casualty, AIG