The “Thinking global, going local” workshop at the Employee Benefits Risk Management Conference, organized by Commercial Risk revolved around how the employee benefits world is adapting to the emerging market demand, and how global benefits service providers are focusing on entering emerging markets such as APAC and Eastern Europe by partnering with regional and local service providers. Also part of the session were Franck Baron – Parima, Federica Maria Rita Livelly – ANRA and Travis Bailey – Advice First.
Every cloud has a silver lining
Over the last two years the world has been hit by the onslaught of Covid-19, and the impact of the pandemic is still at the top of the corporate organizations’ employee benefits agenda. But every cloud has also a silver lining: Since the beginning of the pandemic, clients have been mainly concerned about identifying and possibly waiving any related exclusion of insurance coverage across all countries, and insurers and brokers have worked side by side to support them. Within the specific framework of each local market practice and social security system, benefits uplifts were also provided to support affected employees and their families. Ultimately, we have also seen a surge in demand of digital health, as a way to safely access healthcare.
All this led to a revamped role of the employee benefits industry players and a higher interaction, cooperation and support among human resources, risk management and procurement, between the global and local functions, and transversely among clients, brokers and insurers.
Shift of focus
Global benefits service providers, such as employee benefits networks, have always been known to be pivotal to help clients achieve their alternative financing objectives. Whether extensive or not in terms of geographical coverage, all global providers generally thrive in areas of the world where global corporations have most of their employees and were employee benefits are more generous.
As a result of the global reach of the pandemic, the focus of global benefits providers has expanded to include more countries and employees in need. This does not mean that the need for global coverage was previously overlooked but simply that the duty of care brought the concerns of all countries and all employees at the same level: employers wanted to be there for their employees and for their families. Employee benefits networks, alongside with global brokers and broker networks, have been instrumental beyond the global programs, and beyond the coverage, to support employers and individual employees across the globe, even in remote and emerging countries.
Emerging markets and global network management
Global benefits service providers are focusing more and more on entering emerging markets following the needs of global clients. Employee benefits networks in particular are pursuing this goal in different ways according to their specific corporate structure.
Generally speaking, independent non-proprietary networks may not always have the full control over the local operations, but they have a high degree of freedom in selecting the network insurers they want to cooperate with in each and every market.
At the same time, the proprietary networks that belong to large insurance groups, have already a footprint they can leverage, but they sometimes lack a strong and consistent proposition in emerging areas of the world. And they need to complement their offering in terms of geographical network with national and regional champions.
From a provider perspective, the selection of local partners to enter emerging markets poses some challenges but also some opportunities in order to keep abreast of the growing demand. To a certain extent, this is valid also for global brokers and multinational brokers networks.
Flexibility and ability to understand the local need of a multinational company are key elements to be considered in the selection of local partners. Very often, the local partners are directly in touch with the local human resources and risk management function but they are often executing on a global strategy and on a global program designed at global level.
Financial performance indicators are also key drivers for the selection of a local partner, and there is a tendency to look at the market share and overlooking the profitability of the local partner. A profitable partner can deliver a sustainable and long-term relationship with clients and this often results into their further investments in human capital but also IT, digital solutions and servicing tools, which are all key elements of an enhanced value proposition.
Why manage employee risks through an employee benefits program?
There are clear advantages for a multinational organization to have an employee benefits program in place. The most important advantage is offered by the global coordination and access to the employee benefits network delivered by a dedicated account management team.
During the pandemic, there have been clear advantages for corporations that already had multinational programs in place, compared to the ones managing employee benefits on a local basis: flexibility, efficiency, sustainability of multinational programs allowed corporations to step up to support their employees during the crisis.
For instance, captives have definitely played a key role either to get faster decisions on waiving exclusions, whenever present, or providing benefit uplifts but also on achieving additional flexibility to pay claims on an ex-gratia basis. One of the most important advantages of using a captive is that it allows to achieve flexibility of coverage, alongside efficiencies.
Pooling and global underwriting programs have also helped corporations to align their alternative financing programs during their pandemic by creating efficiencies. During the first phase of the pandemic we have witnessed the clients’ desire to create efficiencies following the decreasing trend in medical claims due to the lower utilization. The intrinsic essence and portfolio diversification of multinational pooling and global underwriting solutions clearly made this process simpler and faster.
Another key advantage of using a multinational program is their transparency, both in terms of claims and frictional costs. The reporting that is offered within the proposition of a multinational program allows the client to get data and reporting, and to take appropriate actions both on underwriting as well as on the prevention, including health and wellbeing initiatives.
Employee benefits programs, and in particular captive programs, can be definitely considered enablers of the implementation of health and wellbeing initiatives. There are several captives that contribute directly to these programs by bearing the costs of such initiatives or by providing discounts upon the expectation of a better claims experience.
Finally, another area on which we have seen multinational programs adding value has been the adoption of digital services across their global organization. After many years of debate within the industry, the pandemic has certainly accelerated the adoption and development of digital services, together with health and wellness solutions, which are clearly related to the revamped role of employers with regards to their duty of care.
Multinational programs are a suited framework to sponsor these services and to educate the local subsidiaries of multinational clients to implement such solutions on a local basis.
Changes to demand in Asia Pacific
Looking at how employee benefits are managed from a multinational point of view, the industry has always struggled to see evidence of the need to implement multinational employee benefits for corporations based in emerging regions - regions that are historically considered and managed as incoming rather than outgoing markets. This has been mainly due to the perceived lack of knowledge and skills on a local or regional basis and due to the different needs of corporations.
Several large Asian based multinationals for example, employ most of their workforce in their domestic market. Achieving an upfront discount or a dividend on a local basis is a more straightforward and simple solution and delivers more than 75% of the efficiencies they could achieve at global level.
With an increased focus and need to abide by the duty of care and employers’ responsibilities, beyond the alternative financing objectives, we may see multinational programs picking up in the near future across Asia and in other emerging areas of the world. At Allianz Global Benefits we started seeing this in the recent months.
The majority of employers across Asia are currently prioritizing the employee experience and considering employee engagement a key factor of the post pandemic success. We can expect this to materialize into the concept of extended benefits, including wellbeing, flexible work, diversity and inclusion – and really trying to tap into the emerging needs of the employees.
Across Asia, we have definitely been seeing an increased focus on wellbeing, including physical, financial and emotional/mental wellbeing, which is mirroring what is happening also at global level. Most of the insurers we work with in the region have complemented their offering with end-to-end digital health services solutions including employee assistance programs.