In today’s global economy where the
majority of U.S. companies are doing business internationally, many companies are exposing themselves to risks of which they
are unaware. While almost all companies
have adequate domestic insurance, many are
not insured internationally. Many business
owners might think that international insurance only applies to very large companies.
They often overlook the fact that, due to the
Internet, companies of all sizes are now operating globally and thus have the need for
international insurance coverage, says Carol
Corporales of Westland Insurance Brokers.
Often the biggest hurdle is recognizing the
exposure, says Corporales, which is not
always obvious. For example, companies
who only sell domestically but send representatives traveling outside of the U.S. risk
exposure for employees who are not covered
by traditional insurance policies.
Smart Business spoke with Corporales
about international insurance coverage and
when it is needed to protect your business.
What is international insurance?
International insurance is designed specifically to address the risks and exposures that
companies face when conducting business
outside of the U.S. Insurance requirements,
limits, coverages, legal liabilities, risks and
exposures are different in each country. Currency valuations, language variations, local
customs, and political and legal considerations can all create unknown exposures and
pitfalls. A basic international insurance policy will cover foreign voluntary workers’ compensation, auto liability and general liability.
For the employer, international insurance
can satisfy local government requirements of
foreign countries and provide protection
against basic and unique exposures by
extending limits and broadening coverage.
Often, coverage limits obtained in foreign
countries are much lower than limits offered
in the U.S., which can create a shortfall in
coverage. It also can provide coverage for
product liability suits filed outside of the U.S.,
which are not covered under traditional general liability policies.
While traveling internationally, employees
may encounter unique exposures that create
significant problems, such as endemic diseases, loss of passport, etc. For employees, a
form of international insurance called foreign
voluntary workers’ compensation provides
medical and travel assistance and repatriation expenses that are not provided under
U.S. workers’ compensation policies.
Are most businesses adequately covered?
Today, many companies simply do not recognize their exposures. Others may not
know that the exposure is insurable. Still others may assume that their general liability
policy covers everything.
U.S. policies are very specific with regards
to coverage territory, terms and conditions.
For example, workers’ compensation policies typically offer coverage on a ‘state specific’ basis and only cover employees while
on the job, not after hours. General liability
policies typically only offer coverage for
claims and suits brought in the U.S.
Only recently has international insurance
coverage become available from standard
carriers. Previously, it was obtained from
international brokers. Today, several of the
major carriers offer international insurance
coverage and can even provide locally admitted coverage for countries that require it.
What is ‘locally admitted’ coverage?
It refers to policies that are issued by insurance carriers that are licensed and authorized by foreign governments to provide coverage in the local country or jurisdiction. In
some countries, only locally admitted insurance is allowed to respond to a claim. This
coverage complies with local regulations and
ensures that taxes and claims are paid and
managed in-country. Locally admitted policies also allow U.S. companies the right to
defend themselves in a foreign court system.
If not mandatory, locally admitted insurance is still worth considering for cost and
tax reasons and to avoid gaps in coverage.
International policies then provide differences in conditions (DIC) and differences in
limits (DIL) coverage, bringing limits up to
U.S. standards and broadening coverage to
include protection against additional risks
that may not be covered by the local policy.
Why do travelers need 24-7 coverage?
Foreign voluntary workers’ compensation
recognizes that when employees travel internationally for business they face unique challenges and are subject to risk at all times for
which the employer is liable. This coverage
provides medical and travel assistance,
which can include such circumstances as
injury, death, repatriation, emergency transfer of funds, or lost travel documents.
Why is international coverage important in
today’s business market?
Foreign countries are rapidly fashioning
themselves to the U.S. and adopting similar
laws and litigious habits. Without proper coverage, companies can suffer large financial
losses, loss of assets and damage to their
brand and reputation. In some instances, foreign executives can be held personally liable
and subject to fines and imprisonment.
International insurance can also include
coverage for kidnap and ransom, transit,
crime, political risks, trade credit exposure,
cyber liability, contract frustration, and environmental damage.
CAROL CORPORALES is a commercial insurance broker for Westland Insurance Brokers. Reach her at [email protected]
or (619) 641-3269.