Every day, an increasing number of companies plan their expansion into the global marketplace. Companies that are already global are continually adding to the number of countries where they operate, ship to, or have exposures in. Risk managers must be prepared if their role suddenly expands from domestic to global risk management. There are six strategies risk managers can follow when managing a global program.
Strategy one: manage global coverage with one program
Having a global policy provides risk managers with the comfort of knowing that gaps in coverage are much less likely to occur when coverage is split between a domestic and international carrier. Administratively, it is easier because there are fewer policies to deal with as well as fewer inception and expiration dates. Controlled master programs enable risk managers to manage all the company's exposures worldwide in one program.
These programs foster uniformity and consistency in coverage from one country to the next, thereby helping to avoid gaps in coverage. Having a controlled master program can keep costs down. Placing separate policies with different carriers is often not the most economical way to purchase insurance.
Issued in the United States, the master contract provides primary coverage when local policies are not required. Locally issued policies are usually written in the native language. In most circumstances, companies will purchase the minimum required coverage locally. The master contract provides coverage for any potential gaps and acts as an excess/difference in conditions policy, picking up on coverage gaps that may exist in the local policy on a first dollar basis and on a difference in limits basis. This augments the local limit and brings the limit of liability up to that on the stateside policy.
Strategy two: create a global loss prevention program
Many companies are exporting their US health and safety standards to their facilities abroad. Risk managers should select carriers that can provide inspections of their overseas manufacturing facilities and implement a plan to standardize the safety program. Carriers should be able to provide standardized services, compliance with local regulations, knowledge of laws, and centralized reports.
Strategy three: control claims costs
Risk managers who want to control claims cost work with their carrier as a team. Open lines of communication should be maintained between both parties. Although it may seem obvious, the key to having a successful program is cooperation between the risk manager and carrier.
Risk managers should provide access to injured employees, witnesses, company records, and the location of the loss. Information should be given on a timely basis in order to best control claims costs. Working together, risk managers and their carriers can create detailed claims reporting and management instructions that should be distributed to key members of the organization around the world and updated periodically.
Strategy four: develop a catastrophe plan
Having a comprehensive catastrophe plan is a very necessary component of a global program. Carriers should be asked to identify quality local medical facilities for injured employees and have a medical evacuation service available for seriously injured employees. Additionally, the carrier should have a network of high quality medical providers that will guarantee lower rates.
Local risk managers, country managers, or plant managers need to be trained so they know whom to call during an emergency. In the event of a natural catastrophe, a company's facility will not be the only one in the area that needs an immediate response. If a company has a facility in an area prone to natural catastrophes, it is important to confirm that the carrier has an adjusting firm designated to respond. Otherwise, the company will be put on a list, with other companies that need a response, to be contacted when an adjuster is available. This could be a costly delay.
Strategy five: settle claims locally
By letting local experts handle the investigation and negotiations, a risk manager may be able to draw attention away from the American ties to the claim. Risk managers do not want to call attention to the fact that the company is owned by an American parent. In many cultures, this implies deep pockets. If a company is operating under a local name, then that is the name that should be used. A claim that might appropriately settle locally for benefits stipulated in the local statutes can become much larger. When the American connection is emphasized, claimants may try to move the venue or collect US benefits (pattern the settlement on the US benefit structure) if they or their family suddenly learn that an American company is asking questions and sending in an adjuster. They may be more likely to hire an attorney. Where an attorney is already involved, the attorney is apt to start asking more questions.
When considering attending a settlement conference outside the US, risk managers need to be aware of prejudice against them or their company. They are the outsider. The carrier's expertise should be used from the beginning to help divert attention away from the fact that the risk manager or company is not local. Authoritarian, take-charge attitudes should be avoided since this perpetuates the “ugly American” myth and can result in increased payments on claims.
Strategy six: establish a global claims system
Carriers should be able to provide global claims data to risk managers in a format that is compatible to the one used for the domestic program. It is very important that both domestic and international claims can be viewed on the same software. Risk managers need access to information worldwide. It should be easy to compare loss data outside the US to loss data in the US so trends can be detected. Updated reserve information should also be readily available.
Being successful globally
The best way to create a global program that protects a company and adds value is to work closely with the carrier and broker. These sources can provide risk managers with many recommendations and best practices. Risk managers who follow these six strategies have the best opportunity for helping their companies be successful globally.