Pooling arrangements are moving towards a more service-orientated approach, with the aim of meeting users’ individual needs. Insurers offering pooling arrangements for multinational corporations are trying to change their product range to satisfy insureds’ individual needs. There is a clear tendency to move away from a product-orientated approach to pooling to a service-orientated one. “This means that the kind of programmes that we will see in the future will be much more individually tailored,” says Roger Beech, European partner at consultants William M Mercer in London.
“Traditionally there have been small groups of pools and company-owned pools which can either work on a stop-loss or on a loss carried forward basis, and that’s it,” says Beech. “So far we’ve seen companies taking a product off the shelf from one of these networks. What we are beginning to see now is a situation where the precise circumstances of each individual company are taken into consideration,” he says. Following this approach there will be more interest in assessing, for instance, an individual company’s appetite for risk to determine which risk management approach should be taken and how the financing and insuring of employee benefits could be in line with the company’s overall strategy.
Swiss Life launched in May a new approach to multinational pooling, moving away from their traditional system to one based on modular solutions. “We developed this product because we had a lot of clients wanting tailor-made solutions,” says Stephan Beit, executive vice president of Swiss Life International Services in Zurich. “They were always asking for exceptions to our standard pooling products, so we though that it would be better to do it the other way round and offer a flexible solution where the clients can choose what they really need.” He adds: “Pooling is essentially about risk-taking or risk involvement from the side of the client, so we have created different modules with different degrees of risk-taking and the client can exactly define what solution suits him best. We have had a very good response to our new approach, not only from our clients but also from consultants who say that this is what the market needs.”
In Brussels, Peter de Vries, senior vice president of the IGP Europe network, says: “We’ve been offering tailor-made services to our clients for quite some time. For example, our international experience reports are designed and produced in such a way that they can be adapted to the needs of the buyers of our pooling products.”
In general, there is a growing need among multinationals for a greater transparency in terms of employee benefits, and the subject is being more openly discussed. “What we have seen is that our clients and multinationals in general are discussing employee benefits more and more, and pooling seems to be the best answer to their needs” says Swiss Life’s Beit. “It’s quite interesting because some have been saying for a long time that pooling was going to die because there were better solutions. But the fact is that it has been growing for the last 20 years and, even though it has not changed dramatically during this period, it is still the most effective tool for providing information to the clients, additional cash flow and managing risk and benefits.”
“There is more interest nowadays than ever before,” says IGP’s de Vries. “I believe one of the reasons for this is the increased familiarity with the way pooling works and also an increased globalisation among multinationals. Ten or 15 years ago multinational pooling was something new and different but today it’s just part of everyday business.”
Multinational corporations taking on pooling arrangements can benefit from cost reduction on employee benefits expenditure and information that can be used to manage these costs in a better way. “It’s not about saving money by cutting benefits but using the most efficient way of financing them, taking a more consistent approach to managing benefits internationally,” says Mercer’s Beech.
“What we are also seeing more and more regularly is the influence of finance and risk management on pooling arrangements,” says Beech. “There has been a lack of a multi-discipline approach to this issue because traditionally pooling on the whole has fallen within the limits of human resources.” He adds: “Now there is a greater interest in see how those benefits are being financed and whether that represents an optimal solution for the organisation.”
This increased interest from multinationals in pooling is also making competition among pooling providers tougher. “Competition is always tough because insurance is basically a commodity that has a price and everybody can compete on price,” says Swiss Life’s Beit. “But the key is to offer the best services and in this respect I don’t think many of our competitor are doing what we are. Some of them are still providing standard products with all kind of exceptions to fit the client’s needs. But we believe our new approach is more attractive and efficient.”
IGP’s de Vries comments: “You can see new players coming up on a regular basis but after a while they disappear. Some change alliances causing disruption to their clients whereas our goal for the last years has always been to provide stability and continue to fulfil our commitments with them, and I believe we have succeeded.”
In the future, a greater harmonisation between countries could ease the way employee benefits work, but so far significant differences still exist. “It has something to do with the nature of the organisation,” says Mercer’s Beech. “It is very difficult to say which country is more proactive than other in terms of employee benefits pooling but differences still exist,” he says. However companies are considering more and more which countries and which contracts are going well and how things could be improved. “Pooling gives people the information which allows to take the appropriate decisions within each location.”
“There will continue to be differences between countries,” says de Vries. “Obviously, the possibility to create a cross-border pension plan system is a huge issue which deserve a lot of attention but nevertheless there will always be plenty of market for insurance coverage at a national level and for multinational pooling.”
In terms of things that could be improved, de Vries comments: “More international harmonisation will help employee benefit arrangements but one of the things we really need in the short term is improved tax legislation in central and eastern Europe to open up those markets.” He adds: “Generally, to improve cross-border regulation is the key to establishing better employee benefits arrangements for multinational corporations.” IPE