Covering all your bases

The complexities of international benefits needs and international/local regulation make compliance for multinational business travel insurance programmes hard to achieve. Stephane Baj outlines some of the issues and options when designing an effective multinational insurance programme
 
In recent years, business travel has changed significantly, as have the risks facing business travellers. Many employees now travel extensively over a number of weeks – often to multiple and far-flung destinations – and these travellers are usually senior executives and top sales people. Business travellers today want a wide range of travel accident cover – from the rarely needed but essential accidental death and dismemberment or emergency evacuation, to more routine covers such as out-of-country medical services, emergency cash and inconvenience benefits such as lost or delayed baggage – and they want it delivered seamlessly, wherever they may travel. Due to the variety of insurance requirements, business travel policies and insurance programmes need to offer companies a broad scope of coverage and services across many different countries, a number of which may have differing laws linked to insurance and claims payments.
 
Employer’s burden

In addition to meeting employees’ emergency needs when travelling, duty of care requirements mean that employers need to ensure that their employees have a good understanding of any threats they may face when they are working or travelling abroad, before they travel. This duty of care also extends to ensuring that employees are equipped with emergency information and contact numbers to easily access local assistance, if they should need help when abroad. Adding further to the burden on companies, good corporate social responsibility and risk management guidance mean insurance buyers now want a uniform response and standard of protection for all emergency and accident incidents – no matter where in the world they occur.

a single global policy is unlikely to deliver the full coverage that employees expect, and that employers are required to provide

Some companies assume that a single global business travel and accident policy purchased by the parent company will be sufficient to cover these requirements. The words ‘single’ and ‘global’ sound thorough and straightforward. However, the complexities of international regulation mean that a single global policy is unlikely to deliver the full coverage that employees expect, and that employers are required to provide. As such, single global policies are likely to be limited in their effectiveness. At the same time, a disjointed set of locally managed policies may result in gaps in cover, and might not satisfy broader needs emerging from global duty of care obligations and corporate social responsibility requirements.

Regulatory divergence

Although business travel insurance programmes are essentially designed as a global employee benefit, the coverage provided is governed by national insurance regulations. The risks of implementing a single policy globally need to be anticipated and considered carefully. For example, there are widely divergent local laws linked to coverage terms and conditions that affect who can place cover and how local policies should be placed. Some countries permit international insurers (non-admitted) to underwrite business, while others require local (admitted) insurers. In addition, local policy language interpretation can create claim payment issues, and having a programme that only works on the basis of a series of local policies placed with different insurers can result in a convoluted claims administration process at best.
 
Consistency of cover

As corporate footprints expand, so does the risk of inconsistent levels of coverage. Getting consistency of cover is important, as companies and organisations don’t want to open themselves up to possible reputational risks, or even an employment practices liability claim, where employees in one country allege they have less coverage than employees in another. 

For example, in Argentina the placement of a non-admitted insurance policy can result in fines to the insured, the insurer and the broker. In China, the placement of a non-admitted cover could impact an insurer’s local operations and pose an execution risk for the payment of local claims, not to mention the fiscal risk for the beneficiaries and the insured entity.

In Japan, the insured company’s decision makers could risk imprisonment, in addition to fines, if cover does not comply with local laws. In Italy, if a local employee is killed or suffers a serious injury or illness due to work-related causes, the employer may have to pay ‘loss of future earnings’ to the employee’s spouse or partner. Finally, in many countries, regulators, or usual employee benefits practices in force, require that employees are provided with terms and conditions – or at least a detailed summary of benefits – in the local language. All these specific regional requirements will not typically be met by a single global policy.
 
A more prudent approach

Instead of relying on a single global insurance policy issued to the parent company, a more prudent approach might be to combine an insurance policy issued to the parent company, with local policies issued to subsidiaries. This global/local, so-called ‘multinational master-controlled’, approach has been adopted for other areas of insurance – and it is an innovative solution for business travel accident programmes, as it provides ‘belt and braces’ protection, backed-up by a comprehensive global service that can be adapted to suit any company.

In Japan, the insured company’s decision makers could risk imprisonment, in addition to fines, if cover does not comply with local laws

These multinational programmes work best by including locally admitted policies and limits to insure risks of local employees and travelling employees in these countries. In these programmes, a locally admitted insurer will issue a local insurance policy that complies with applicable insurance laws, taxes and fees. Claims and tailor-made benefits for that specific market can be made, adjusted and paid for in that market, either to the employee, or the appropriate local beneficiaries of the local policy.

These local policies can then be combined with a parent company ‘umbrella’ policy, which is issued in the jurisdiction that insures the parent company’s employees. This approach enables the provision of supplementary insurance reimbursement to the parent company for any potential gaps in cover that a local policy may have. Thus, by combining local policies with a master global policy, companies with multinational interests and employees travelling to global locations can protect them and meet local insurance laws. 
 
Coverage is not the only consideration

Coverage is not the only aspect that can be impacted by a single global policy. Claims payments can be a problematic area, as laws surrounding the payment of insurance benefits direct to the claimant or a third party differ considerably from country to country. For example, if an executive employed by a European company with a single global policy is injured while on business in Brazil and is taken to hospital, a European insurer is not admitted there, so is prevented from paying the hospital expenses directly. Instead, the claim would need to be paid to the parent company, and the money transferred to the local company, which can then pay the hospital. However, the claims payment could be liable for local taxes. Such an approach adds complexity and delays, and does not reassure employees that their insurance cover will provide the required financial protection at their moment of need.

a more prudent approach might be to combine an insurance policy issued to the parent company, with local policies issued to  ubsidiaries

Another aspect to consider is that employees now often travel to countries where medical facilities may be limited compared to Western standards, which could result in the need to evacuate the injured or sick employee to a location with more suitable medical facilities. This is the principle of ‘nearest place of medical excellence’, which travelling employees tend to consider as the basis of duty of care. Other risks include employee exposure to natural disasters, political and other security threats, and extortion schemes. All these threats – to which business travellers are more and more exposed – require complex and comprehensive response plans.

In addition, employee demands can become very specific, ranging from language capabilities or addressing the need for cultural understanding with regards to handling communications around a serious medical condition, to responding to incidents like the Icelandic volcanic ash cloud crisis, the Bangkok flood blackout, or even sudden terrorist attacks. Employees now expect their company to be ready to respond to all these types of incidents.

by combining local policies with a master global policy, companies with multinational interests and employees travelling to global locations can protect them and meet local insurance laws

Duty of care obligations and jurisprudence evolve as courts set legal precedents. Not only must companies ensure they have robust response plans, but more and more, they are also expected to have processes and controls in place that identify exposure, as well as inform and prepare their employees to mitigate risks. Specialist business travel insurers should offer travel risk management services to help prepare and protect insureds against these risks, and provide quality and experienced emergency and medical assistance on the ground. 

Key considerations

In addition to a strong financial rating, key criteria for choosing a multinational insurer might include the breadth of their global network, the depth of their international and local underwriting expertise, the quality and experience of their on-the-ground emergency partners, the expertise of their claims handlers, and a profound understanding of the overall requirements of and changes to international benefits requirements. These services need also to be supported by high-quality technological solutions, which enable easy oversight of the programme so that risk managers, insurance buyers and HR managers can monitor policies, the number of employees travelling to selected locations and risk levels. Many clients also benefit from employee support information services, so that employees can easily access practical travel and emergency advice and information – both before and during a trip.

Claims payments can be a problematic area, as laws surrounding the payment of insurance benefits direct to the claimant or a third party differ considerably from country to country

By covering all bases effectively with a multinational insurance programme that includes a combination of local policies and a parent policy, managers can be reassured that their employees will have cover and access to care whenever and wherever they need it.