Whether packaged or standalone, employers want international benefits to offer consistent levels of cover wherever their staff are working. Sam Barratt investigates
International assignments and overseas postings are fast becoming the norm as more and more businesses build their global presence. But, with regulation getting tighter in many countries around the world, it’s becoming increasingly important to ensure that international benefits are fit for purpose, and that they are maximising value for employers’ benefit spend.
Figures from the Global Business Travel Association show just how much employers are developing their international footing. Its GBTA BTI Outlook – Annual Global Report & Forecast predicts that business travel spending will grow globally over the next few years, with 8.2 per cent growth expected in 2014 followed by growth in excess of 7 per cent for each of the following three years.
This interest in overseas business is reflected in sales of international benefits. Aetna International global head of distribution Nic Brown says that for the last few years’ sales of international medical insurance have increased annually by an average of 10 per cent, with no signs that this will change. “When an employee’s working overseas, health is a necessity,” he says. “Trade agreements and simpler visa requirements have made it easier to build business overseas but increases in country-specific compliance and regulation mean that employers need to be certain their employees have the right cover.”
Compliant solutions can include minimum cover requirements; using a fronting company to provide a local policy; and ensuing membership of the state health insurance system. Failure to meet the requirements can have serious ramifications. For instance, a non-compliant policy in the Netherlands could see an employee hit with a fine while, turn up at passport control in Abu Dhabi without the right cover and you’ll be sent home.
These regulatory clampdowns and the speed in which they are introduced causes issues for brokers. “We used to be able to offer international medical insurance that would cover anywhere in the world but today there are differences from country to country so you have to be much more careful,” says April Medibroker sales manager Steve Nelson. “The insurers are up to speed in the large expatriate areas but it can be more difficult to be certain of compliance in new territories or countries that off the expat map.”
It’s not always easy to understand what is required either. A good example of this is the US, where the Affordable Care Act, also known as Obamacare, has introduced uncertainties for insurers. “They’re still fine-tuning the act but it’s not easy to understand the implications for inbound expatriates,” says Axa PPP International sales and marketing director Kevin Melton. “We’ll keep monitoring the situation and put together a compliant solution once there’s more certainty.”
While regulatory requirements may be creating a huge number of different products to ensure compliance in every country, international benefits consultants are also facing pressure from employers to provide consistent levels of cover across their workforces, and all their benefits, be they pensions, life cover, healthcare or or other benefits.
This ensures that all employees are treated equally. This could be particularly important if, for example, there is a serious incident such as a fire or explosion that results in the death of employees from different countries. If their families receive different levels of compensation, there could be calls of discrimination that might damage the company’s reputation.
But achieving this consistency can be difficult. As well as grappling with regulatory requirements that make it impossible to have one policy that works for all employees around the globe, cultural differences can mean setting benefit levels is tricky.
As an example Towers Watson senior consultant Steve Desborough points to the upper age limit for cover for an employee’s children. “In the UK children are usually covered until they’re 21 or 25 if in full time education but in the US it’s standard to cover them until age 26.”
Even more off the wall for the UK medical insurance specialist is the approach towards who can be included on a plan. For instance in Libya it’s culturally acceptable to extend cover to parents.
Differences in healthcare systems around the world can be another hurdle when trying to arrange comparable levels of cover. For example while a UK employee may be happy accessing the NHS for their primary care, send them to the US and they would baulk at the prospect of funding this themselves.
Where these differences exist across a workforce, Desborough says employers would need to go to the highest benefit level. “You need to be mindful of all the different regulations and construct a programme that treats employees fairly. It’s not always straightforward but we are starting to see more demand for this global benefit provision.”
One stop shop
To help facilitate this, a growing number of providers are packaging international benefits to provide simple solutions for employers. As an example Allianz Worldwide Care packages its international medical insurance, long term disability, life assurance and accidental death and dismemberment benefits with options to include assistance and business travel.
“Bringing these additional benefits alongside international medical insurance really adds value,” says Allianz Worldwide Care head of regional sales Andy Seale. “Employers will often take out these benefits separately so it is much more convenient to be able to get them from one provider.”
Brokers agree. PMI Health Group senior consultant Chris Beardshall describes this joined up approach as exciting.
“Traditionally these products were bought in silos so you’d never be able to get the economies of scale or deals you can get when they’re packaged,” he says. “It also fits with the way a lot of overseas assignments are arranged. The finer detail can often be left to the last minute so being able to call one company to arrange everything is great.”
Having one provider also ensures there is no duplication of cover. For example, medical benefits including emergency cover and expatriation can be included on both international medical insurance and business travel insurance. There can also happen with some of the more peripheral benefits. Employees can find themselves able to pick from several different assistance companies to find out about local healthcare provision.
Stripping out this duplication can make pricing keener but Seale says that employers will see further price benefits as a result of selecting a packaged product. “Global medical inflation is a major issue but by running it alongside other products it will help to stabilise pricing. Rather than see increases of 10 per cent plus every few years, an organisation might see a more manageable 6 per cent each year,” he explains.
Given these benefits, it’s not surprising that a growing number of insurers are packaging their international products. Ace is also promoting its packaged benefits, bringing together products including personal accident, business travel insurance, critical illness insurance and cash plans, while Zurich’s international offering brings together death, disability and income replacement benefits under a single worldwide plan.
Aetna has taken a slightly different stance, partnering with Swiss Life to provide a range of group risk products including life assurance and pensions. “Products aren’t always portable so there is a demand for international benefits that can be used wherever an employee is based,” says Brown.
But while there are benefits to this packaged approach, there are some drawbacks too. Seale says that some risks will be good for medical insurance but poor on the life side. As an example he points to someone working on an oil rig.
“Their job means they’re likely to be fit so claims would be low on the medical insurance side. However it’s a dangerous job so the risk of a claim on the life assurance would be high,” he explains. “You have to get the balance right to make it affordable.”
Additionally, while this approach is common in other parts of the world such as continental Europe, the UK market is more suspicious of buying multiple products from one provider. “It won’t always be the best way to arrange cover,” says Beardshall. “You won’t necessarily get best of breed and as there are only a few insurers that are offering these packaged products choice can be more limited.”
However, as there is appetite for packaged products, other insurers are expected to join the market. For instance Melton says that he is in discussions with other parts of Axa to develop an international benefits proposition.
“There is demand for this approach from some brokers so we are looking at how we can make it as seamless as possible,” he says. “This will ensure that administration is kept to a minimum.”
Whether or not the packaged approach to international benefits becomes the norm, the introduction of more regulation around the world coupled with demand for more consistent benefits solutions, will have implications for the international medical insurance market.
For insurers, more consolidation is a certainty as it becomes increasingly important to be up-to-speed with the rules around operating in different countries. Already this trend is in motion with Aetna’s announcement last November that it is to acquire Interglobal.
“You need global infrastructure to really understand the regulatory changes around the world,” says Melton. “It’s not surprising that smaller groups are being swallowed up.”
While insurers may be questioning whether they’re big enough to survive, the complexities of current market conditions are ideal for brokers. “It’s a great opportunity for brokers,” says Seale. “Navigating all the regulation as well as the different products on offer, means it’s much more about consultancy than selling. They can really demonstrate their value.”