In today’s global economy, most businesses have some type of foreign risk exposure whether it’s exporting goods or services to foreign countries, opening or acquiring operations outside its home country, or even sending employees overseas to conduct business on behalf of the company.
That’s why you need to understand your risk exposures and then transfer that risk to an appropriate insurance program, so that you are not unknowingly self-insuring or even over-insuring, says Marilyn Salley, client executive at Arthur J. Gallagher.
Smart Business spoke with Salley about how to minimize your company’s global risk.
What trends are you seeing with global risk?
Unfortunately, some businesses are finding that they don’t have the right coverage in place until after they have a claim.
Not all insurance policies are created equal.
A ‘standard’ commercial general liability policy purchased for operations in the United States has very specific coverage territory limitations. For example, if a domestic business had a product liability claim that occurred in the United States, it would be covered because the standard territory includes the United States (and its territories), Puerto Rico and Canada. If this business also sold goods in Mexico, the United Kingdom, China or any other country, the business would be self-insuring for that same loss if it occurred outside the covered territory — unless a worldwide endorsement was added to the policy. This type of endorsement must be negotiated and is usually only available for incidental sales.
How should a U.S. based company cover risk exposures outside the United States?
Businesses should purchase a foreign insurance package for risk exposures for travel, sales and operations outside the United States. This can be a very cost-effective approach to transfer risks related to foreign general liability, foreign automobile liability, foreign voluntary workers’ compensation, travel accident/sickness, kidnap and ransom and terrorism.
What should you look for when purchasing an international insurance package?
Insurance rules and regulations vary dramatically by country. It’s extremely important to make sure the coverage is broad and tailored to the countries where your exposure exists.
A business with local foreign operations must consider whether insurance is compulsory, legal and taxable. For instance, a U.S. business that has a local operation in China — even a small sales office — should have a master foreign package policy, in addition to a local policy that is issued in China by your U.S. brokers local office. In China, non-admitted insurance is illegal, and violators are subject to fines and/or incarceration.
Every country has its own regulatory guidelines for insurance. When the local policy is placed, make sure you’re receiving a policy digest in English, so you know what you have purchased.
Why is it important for businesses with employees who travel to have a foreign package?
In today’s world, it’s important to have all of the appropriate insurance in place to protect your assets and your employees. When you have employees traveling overseas, it’s imperative to have travel accident/sickness coverage as well as kidnap and ransom coverage. This would be in addition to foreign voluntary workers’ compensation, automobile and more.
In some countries, if a medical evacuation is required, the individual must provide a credit card before services will be rendered. This can be truly impossible due to circumstances and extraordinary costs. A business can transfer this risk to the insurance carriers and take the burden off employees.
Through the use of technology, an employee can now download the carriers app and obtain local assistance for any need, whether it’s medical assistance, personal assistance or travel assistance.
Is this something midsized companies can do, when they don’t have as many resources?
Of course, this level of service is totally open to midsized companies. Partner with a risk adviser today that can seamlessly provide an integrated insurance program, regulatory guidance and local resources across the globe.
Insights Insurance/Risk Management is brought to you by Arthur J. Gallagher & Co.