International insurance programmes are no longer simply for large multinationals. As the world has got smaller, many medium-sized companies are now operating internationally and as a result, are looking at the issue of how to structure an international insurance programme. This needs to be carefully structured to take into account a number of important factors, including cost, control, consistency and compliance. And importantly, risk managers or buyers have to be able to make the case for that programme to their board or senior directors.
Cost pressures and the board
Risk managers, or insurance buyers of companies with international operations, are often under considerable price pressure from their own bosses, and it can be difficult to explain the importance and value of a well-structured and planned programme as opposed to just the cheapest. And this is where insurers and brokers can do more to support customers by explaining the true value of a programme, so that in turn, this can be effectively communicated to the board.
For example, there may be three programmes on offer from different insurers: one costs €1m, another €1.5m, and the third costs €2m. If the broker cannot clearly explain in detail why a programme is more expensive, then the risk manager will likely choose the cheaper option. But by opting for an easy, cheap programme, when it comes to claims and servicing, this can often bring headaches and unwelcome surprises. A more complex and well-structured programme, which involves more time and energy from all sides and may not necessarily be the cheapest, will generally see less surprises.
The broker needs to be able to explain to the customer the difference between the programmes on offer, so that the risk manager or insurance buyer can also convince their board that it is worth spending more for a particular programme. Insurers and brokers need to be better at helping risk managers to be able to explain the situation to decision-makers.
Control and transparency
Another factor when structuring an international programme is control. A risk manager wants to have control over the programme to ensure that it provides the required coverage worldwide, as well as having full transparency over the programme. The problem with standalone policies in the local language is that it can be hard to be 100% sure about what is covered, and what is not, under the policies. Standalone policies can also be time consuming and expensive.
With an international programme, on the other hand, multinational insurers such as Zurich offer tools that allow policy issuance and payments on local policies to be tracked, as well as claims and risk engineer reports, providing full control and transparency for the risk manager.
Consistency and avoiding surprises
No one likes surprises, least of all a risk manager, or their company’s board. To ensure that an international insurance programme is consistent and operates in the way that everyone expects, it is necessary to spend time beforehand getting the programme set up properly and looking at how it will operate in the event of a claim.
For example, everyone needs to know beforehand where the customer wants the claim to be paid. This is crucial because there may be operational or tax considerations that decide this in different locations. Generally, companies want the whole of the claim to be paid locally, whether from the local policy or the master policy. But if, for example, there is a claim in Venezuela, while it may legally be possible to pay the whole claim in the country, with the currency devaluation currently in that country, the customer may not want to be paid locally. They may prefer to be paid in the home territory and accept the additional taxes, and then it can be their decision whether to reinvest in Venezuela, or not.
In the end, the broker needs to work with the customer to decide where the interest of the company lies. If everyone is crystal clear from the start as to where the claim is to be paid, then there will be no surprises.
Taking the time to get it right
Such topics are rarely part of the conversation when it comes to discussing the structure of programmes at the start. But it is about spending time, before the policy incepts, ensuring that everyone is clear as to where claims will be paid and how they will be paid, and understanding the entire claims process.
Ultimately, it is about having a relationship between the customer, the broker and the insurer, and time is required beforehand, together with the knowledge and understanding of insurance programmes, to be able to highlight these issues and ensure that a programme operates as the customer expects.
We all live in times where we are normally in a hurry, but insurance is not something that should be rushed. It is important to sit down early and have the time to discuss all the issues and the process, which will allow not only the risk manager to explain the programme to the board, but also to ensure that it works as expected. And as a result, there will be a successful and effective international insurance programme – with fewer surprises.
Contributed by Frank Thomas Merten, global relationship leader, IP programme solutions and implementation, customer relationship management, Zurich Commercial Insurance Spain