Traveling and working abroad often comes with risks, and savvy employers recognize that having employees overseas heightens their corporate liability. By protecting employees against the risks of global travel, employers can manage risks to their business, finances and reputation.

“In today’s litigious society, corporate governance and duty of care are paramount to a company’s crisis management strategy,” says Justin Priestley, executive director for Aon Crisis Management. “Businesses need to react to incidents in a timely and consistent manner, protecting their people, assets, balance sheet and brand reputation.”

Smart Business spoke with Priestley and Kevin J. Pastoor, CPCU, managing director of Aon Risk Solutions, about how to keep your employees safe abroad.

 

How can businesses ensure that they are meeting their duty of care requirements?

There is a lot of complicated case law on this subject, but the issues are simple. There are three things businesses should consider, and by doing so, they will meet their duty of care.

The first step is actively trying to understand what the risks are for your people, and that means doing a formal assessment of risk. If you say you didn’t know about it, that’s not good enough. You could have tried to find out.

The second thing you need to do is come up with appropriate risk management measures that are matched to the risks you think exist. You need to demonstrate that the plan you are coming up with is appropriate for the risks your employees are facing.

Third, organizations should have a plan and discuss it. Talk about appropriate levels of insurance and how employees are going to get to the airport if there is a problem. Broadly speaking, those steps together provide organizations with a much better opportunity to demonstrate that they are meeting duty of care.

How can businesses ensure they are prepared for travel emergencies?

An adviser can match what it delivers to what it thinks are the main pillars of activity. So up front, it would provide information to travelers so they are aware of the risks in a particular area. An adviser can also provide some basic-level training for travelers.

Another thing a consultant can do, if people are traveling to an elevated risk location — somewhere like Mexico or India — is conduct an independent risk assessment of that proposed journey. It can be done quite quickly; it’s not some long, laborious process. It provides the concerned organization with a third-party independent review for a journey before it is booked, which backs them up in their assessment.

What type of training and education should employers provide for traveling employees?

There are two types of training. E-learning allows organizations to show that people have done the training. We also do an elevated risk course, which is instructor-led.

That course tends to be more specific to a particular client. Another option is an elevated risk course, in which the threats and risks are determined for where someone is going, and then travelers are trained to understand them. For instance, if you are in Central America, kidnapping is one of the major risks, and this is how it happens.

Then a consultant can offer advice on situational awareness. Many people understand what to look for and how to notice if something suspicious is happening. There is some really basic advice on risk mitigation strategies, like not wearing your Rolex watch if you’re traveling in more interesting parts of the world.

It’s important to focus on sensible, pragmatic advice that businesspeople need to understand.

 

What innovative services can help business travelers?

Mobile technology enables a traveler to see a country’s risk information on the go. Putting that information in people’s pockets is actually quite useful.

It doesn’t produce 20 pages of data on each country. It’s short, concise and condensed. Most people don’t want to read for 30 minutes to understand an issue. They want to read it in two minutes.

Second, there is a nice travel management system for risk managers or corporate security that enables them to know at the push of a button where their people are on a day-to-day basis and what the risk exposure is for those people.

Aon WorldAware, our online country information service, grades risks by looking at what is going on in that country, the capability of the terrorist organizations and their modus operandi. It gives ratings of 1 through 5, on a daily, weekly, or monthly basis, and they can print a report showing how many people they have in low-risk countries, or Level 4 or 5 countries, how many incidents they have had and where those incidents occurred.

It is an independent assessment. A partner has people constantly reviewing every country. There are 10 factors, including terrorism, civil disobedience, kidnap and ransom, street crime. All 10 factors for every country are assessed and scored 1 through 5.

Countries rated 1 through 3 are appropriate for routine business travel. For countries 4 and 5, you have to consider the risks a bit more. To put that into context, Level 5 countries like Iraq, Somalia, or Afghanistan have extreme risks.

The system monitors what happens in the world on a daily basis, and the countries are updated as the risk profile changes.

 

Justin Priestley is executive director for Aon Crisis Management. Reach him at 44 (0)20 7882 0478 or justin.priestley@aon.co.uk. Kevin J. Pastoor, CPCU, is managing director of Aon Risk Solutions. Reach him at (248) 936-5346 or kevin.pastoor@aon.com.

Insights Risk Management is brought to you by Aon Risk Solutions

Published in Detroit

Traveling and working abroad often comes with risks, and savvy employers recognize that having employees overseas heightens their corporate liability. By protecting employees against the risks of global travel, employers can manage risks to their business, finances and reputation.

“In today’s litigious society, corporate governance and duty of care are paramount to a company’s crisis management strategy,” says Justin Priestley, executive director for Aon Crisis Management. “Businesses need to react to incidents in a timely and consistent manner, protecting their people, assets, balance sheet and brand reputation.”

Smart Business spoke with Priestley and David Drier, an international producer at Aon Risk Solutions, about how to keep your employees safe abroad.

How can businesses ensure that they are meeting their duty of care requirements?

There is a lot of complicated case law on this subject, but the issues are simple. There are three things businesses should consider, and by doing so, they will meet their duty of care.

The first step is actively trying to understand what the risks are for your people, and that means doing a formal assessment of risk. If you say you didn’t know about it, that’s not good enough. You could have tried to find out.

The second thing you need to do is come up with appropriate risk management measures that are matched to the risks you think exist. You need to demonstrate that the plan you are coming up with is appropriate for the risks your employees are facing.

Third, organizations should have a plan and discuss it. Talk about appropriate levels of insurance and how employees are going to get to the airport if there is a problem. Broadly speaking, those steps together provide organizations with a much better opportunity to demonstrate that they are meeting duty of care.

How can businesses ensure they are prepared for travel emergencies?

An adviser can match what it delivers to what it thinks are the main pillars of activity. So up front, it would provide information to travelers so they are aware of the risks in a particular area. An adviser can also provide some basic-level training for travelers.

Another thing a consultant can do, if people are traveling to an elevated risk location — somewhere like Mexico or India — is conduct an independent risk assessment of that proposed journey. It can be done quite quickly; it’s not some long, laborious process. It provides the concerned organization with a third-party independent review for a journey before it is booked, which backs them up in their assessment.

What type of training and education should employers provide for traveling employees?

There are two types of training. E-learning allows organizations to show that people have done the training. We also do an elevated risk course, which is instructor-led.

That course tends to be more specific to a particular client. Another option is an elevated risk course, in which the threats and risks are determined for where someone is going, and then travelers are trained to understand them. For instance, if you are in Central America, kidnapping is one of the major risks, and this is how it happens.

Then a consultant can offer advice on situational awareness. Many people understand what to look for and how to notice if something suspicious is happening. There is some really basic advice on risk mitigation strategies, like not wearing your Rolex watch if you’re traveling in more interesting parts of the world.

It’s important to focus on sensible, pragmatic advice that businesspeople need to understand.

What innovative services can help business travelers?

Mobile technology enables a traveler to see a country’s risk information on the go. Putting that information in people’s pockets is actually quite useful.

It doesn’t produce 20 pages of data on each country. It’s short, concise and condensed. Most people don’t want to read for 30 minutes to understand an issue. They want to read it in two minutes.

Second, there is a nice travel management system for risk managers or corporate security that enables them to know at the push of a button where their people are on a day-to-day basis and what the risk exposure is for those people.

Aon WorldAware, our online country information service, grades risks by looking at what is going on in that country, the capability of the terrorist organizations and their modus operandi. It gives ratings of 1 through 5, on a daily, weekly, or monthly basis, and they can print a report showing how many people they have in low-risk countries, or Level 4 or 5 countries, how many incidents they have had and where those incidents occurred.

It is an independent assessment. A partner has people constantly reviewing every country. There are 10 factors, including terrorism, civil disobedience, kidnap and ransom, street crime. All 10 factors for every country are assessed and scored 1 through 5.

Countries rated 1 through 3 are appropriate for routine business travel. For countries 4 and 5, you have to consider the risks a bit more. To put that into context, Level 5 countries like Iraq, Somalia, or Afghanistan have extreme risks.

The system monitors what happens in the world on a daily basis, and the countries are updated as the risk profile changes.

Justin Priestley is executive director for Aon Crisis Management. Reach him at 44 (0)20 7882 0478 or justin.priestley@aon.co.uk. David T. drier is an international producer at Aon Risk Solutions. Reach him at (314) 719-3892  or david.drier@aon.com.

Insights Risk Management is brought to you by Aon Risk Solutions

Published in St. Louis

There has never been a more challenging time for employers dealing with the dual problem of rising health care costs and declining employee health. As such, employers need to be thinking very differently about how they approach health care, says Jim Winkler, a senior vice president and large employer segment leader at Aon Hewitt.

“Employers need to actively, directly and candidly talk with employees about the need to change behaviors for better health,” says Winkler. “You need to build in the right combination of rewards so that employees understand that if they want to spend a large amount of ‘house money’ on health care, they have to follow  ‘house rules’.”

Smart Business spoke with Winkler about the challenges and solutions surrounding health and benefits, and how to address them.

How can employers begin to have a conversation with employees about health care?

You first have to understand how consumers think about health care. Our Consumer Mindset 2011 research tells us that they understand that the system is broken, they understand the political dynamics and they know what they need to do in terms of health. Everyone knows they shouldn’t smoke, they should eat better and they should exercise. However, the messages that employees react best to are those that make navigating health easier and more personal.

Don’t talk to them about the company’s costs. Instead, talk about how a lack of health may be getting in the way of teaching a grandson baseball. You need to make it meaningful to employees so they understand the results of good health.

You also need to deploy more than just one tactic. You can’t just have a great communications strategy, and you can’t just have a plan design or incentive strategy. With consumer-driven health plans, consumers understand that you want them to be better consumers, but if all you give them is that design mechanism, you’re just going to frustrate them because they don’t understand the cost of specific health services. You have to give them the tools and information to navigate a broken system and help them see how their exposure to potentially higher out-of-pocket costs is going to enable them to make healthier decisions. You have to connect those pieces.

For example, if you have a consumer-driven plan, don’t just put employer money in the savings account. Instead, say, ‘If you complete a health risk assessment and you know your biometrics, then we’ll put money into your account.’ Make it very clear that you want employees to be successful under the benefits plan and to have access to more of the employer’s money, but you need them to do something in exchange.

People don’t always like that, but they can see very clearly how the actions they take can lead to good things and how inaction can result in a less satisfactory benefit plan.

How can an employer target better health for employees?

There are two starting points. First, as an employer, you want to have your arms around your data. Maybe you’ve done a health risk questionnaire and you have medical claims data in such a way that you can stratify it to say that, of the eight greatest risk factors (such as smoking, lack of health screenings, poor diet, etc.) and the 15 most prevalent chronic conditions, these are the ones that are most prevalent in your population. From that, you can target those two or three greatest risk factors that will lead to the best improvement in health status and a lessening of the frequency and severity of chronic disease.

If you don’t have that data because you’re a smaller company or you haven’t performed a health improvement strategy yet and have no real insight into company-specific risks, the three areas to target are poor diet, physical inactivity and lack of health screenings.

Your real opportunity for impact is to get after weight, as more than two-thirds of the U.S. population is either overweight or obese, and physical inactivity. With health screenings, you begin to build a baseline, and the more screenings you do, the more you understand risk in your population. And screenings are an early identifier of risk and disease, so you start to put a dent in high-cost conditions. If people wait until they’re diagnosed, then they’re likely to be on medication for life and have a higher cost outcome.

How do you address concerns about employers being involved in employees’ health care?

As an employer, you have to start with the basic premise that your current cost environment, the way you’re running your benefits program today, is not sustainable. If you’re going to change the status quo, can you continue to do the things you’ve been doing, like plan design changes that shift costs to employees and changing your medical vendor? Is it reasonable to assume the same tactics will produce a different outcome?

No, so you have to take a different approach. There are two paths you can take. One is the path of house money, house rules. Be candid with employees and share that the reason you’re talking to them about their health, and their behavior,  is that you’re spending a lot of money on health care, so the organization has a vested interest in managing health care costs more effectively.

Second, in a challenging global economy, you need a healthy, present, high-performing work force. What percentage of your work force is out because of health issues? What if you could cut that number in half? You add nothing to your payroll costs, you spend less on medical coverage, and you get people back to work who are more productive to the business.

It’s in your best interest to drive business results to spend less on health care and have a healthy work force, and the way you’re going to get that is by engaging people around their health.

Jim Winkler is senior vice president at Aon Hewitt, the global human resource solutions business of Aon plc. Reach him at jim.winkler@aonhewitt.com. Linda Van Howe is senior vice president at Aon Hewitt, Detroit practice leader - Health and Benefits. Reach her at (248) 936-5238 or linda.van.howe@aonhewitt.com.

Insights Risk Management is brought to you by Aon Risk Solutions

Published in Detroit

There has never been a more challenging time for employers dealing with the dual problem of rising health care costs and declining employee health. As such, employers need to be thinking very differently about how they approach health care, says Jim Winkler, a senior vice president and large employer segment leader at Aon Hewitt.

“Employers need to actively, directly and candidly talk with employees about the need to change behaviors for better health,” says Winkler. “You need to build in the right combination of rewards so that employees understand that if they want to spend a large amount of ‘house money’ on health care, they have to follow  ‘house rules.’”

Smart Business spoke with Winkler and John T. Vollmer, senior vice president/local practice leader, Aon Hewitt, about the challenges and solutions surrounding health and benefits, and how to address them.

How can employers begin to have a conversation with employees about health care?

You first have to understand how consumers think about health care. Our Consumer Mindset 2011 research tells us that they understand that the system is broken, they understand the political dynamics and they know what they need to do in terms of health. Everyone knows they shouldn’t smoke, they should eat better and they should exercise. However, the messages that employees react best to are those that make navigating health easier and more personal.

Don’t talk to them about the company’s costs. Instead, talk about how a lack of health may be getting in the way of teaching a grandson baseball. You need to make it meaningful to employees so they understand the results of good health.

You also need to deploy more than just one tactic. You can’t just have a great communications strategy, and you can’t just have a plan design or incentive strategy. With consumer-driven health plans, consumers understand that you want them to be better consumers, but if all you give them is that design mechanism, you’re just going to frustrate them because they don’t understand the cost of specific health services. You have to give them the tools and information to navigate a broken system and help them see how their exposure to potentially higher out-of-pocket costs is going to enable them to make healthier decisions. You have to connect those pieces.

For example, if you have a consumer-driven plan, don’t just put employer money in the savings account. Instead, say, ‘If you complete a health risk assessment and you know your biometrics, then we’ll put money into your account.’ Make it very clear that you want employees to be successful under the benefits plan and to have access to more of the employer’s money, but you need them to do something in exchange.

People don’t always like that, but they can see very clearly how the actions they take can lead to good things and how inaction can result in a less satisfactory benefit plan.

How can an employer target better health for employees?

There are two starting points. First, as an employer, you want to have your arms around your data. Maybe you’ve done a health risk questionnaire and you have medical claims data in such a way that you can stratify it to say that, of the eight greatest risk factors (such as smoking, lack of health screenings, poor diet, etc.) and the 15 most prevalent chronic conditions, these are the ones that are most prevalent in your population. From that, you can target those two or three greatest risk factors that will lead to the best improvement in health status and a lessening of the frequency and severity of chronic disease.

If you don’t have that data because you’re a smaller company or you haven’t performed a health improvement strategy yet and have no real insight into company-specific risks, the three areas to target are poor diet, physical inactivity and lack of health screenings.

Your real opportunity for impact is to get after weight, as more than two-thirds of the U.S. population is either overweight or obese, and physical inactivity. With health screenings, you begin to build a baseline, and the more screenings you do, the more you understand risk in your population. And screenings are an early identifier of risk and disease, so you start to put a dent in high-cost conditions. If people wait until they’re diagnosed, then they’re likely to be on medication for life and have a higher cost outcome.

How do you address concerns about employers being involved in employees’ health care?

As an employer, you have to start with the basic premise that your current cost environment, the way you’re running your benefits program today, is not sustainable. If you’re going to change the status quo, can you continue to do the things you’ve been doing, like plan design changes that shift costs to employees and changing your medical vendor? Is it reasonable to assume the same tactics will produce a different outcome?

No, so you have to take a different approach. There are two paths you can take. One is the path of house money, house rules. Be candid with employees and share that the reason you’re talking to them about their health, and their behavior,  is that you’re spending a lot of money on health care, so the organization has a vested interest in managing health care costs more effectively.

Second, in a challenging global economy, you need a healthy, present, high-performing work force. What percentage of your work force is out because of health issues? What if you could cut that number in half? You add nothing to your payroll costs, you spend less on medical coverage, and you get people back to work who are more productive to the business.

It’s in your best interest to drive business results to spend less on health care and have a healthy work force, and the way you’re going to get that is by engaging people around their health.

Jim Winkler is senior vice president at Aon Hewitt, the global human resource solutions business of Aon plc. Reach him at jim.winkler@aonhewitt.com. John T. Vollmer is senior vice president/local practice leader, Aon Hewitt. Reach him at (314) 719-3834 or john.vollmer@aonhewitt.com.

Insights Risk Management is brought to you by Aon Risk Solutions

Published in St. Louis

As retailers consider ways to control cost and increase revenue, many are achieving those goals by creating a captive insurance company.

Captives exist to underwrite the risk of their parent and affiliated companies, and can provide many benefits to retailers, says Adrian Richardson, managing director of Aon Risk Solutions, Global Risk Consulting.

“The concept is not new,” Richardson says. “Companies have had their own insurance companies financing their risks since the early 1900s. The idea was considered alternative then but has become a mainstream part of how insurance programs are put together.”

Smart Business spoke with Richardson and Terry Rodes, a senior vice president with Aon Risk Solutions, about how captive insurance companies can help retailers, as well as those in other industries, control costs and increase revenue.

Why should businesses consider joining or creating a captive insurance company?

Businesses should consider joining or creating a captive because captives can be an efficient methodology to finance their retained loss costs. The first step for a company that is considering moving from a guaranteed cost program is to determine whether it makes sense to retain risk.

Do you have a frequency of losses that is reasonably predictable? If so, it’s unlikely to  make sense for you to dollar swap with the insurance market. Paying $1 in premium and getting, say, 60 cents back from an insurer in paid losses might not be the most efficient way of insuring your risk.

Once you have a captive structure in place, you can build from an initial platform and consider what else to do with that insurance structure. How can you expand the use of the captive to not just simply finance retained loss costs in an efficient manner? How can you start creating some kind of revenue growth?

What are some ways retailers are expanding the use of their captives?

Many companies provide warranties or guarantees to their products. These  might be part of a program in which both administration and risk is assumed by a third party.  The opportunity could exist where these programs can be restructured so your captive insurance company accepts the risks associated with the warranty or guarantee.

If a retailer is using a third-party  warranty company to administer and underwrite the entire program, then there is no risk to the retailer. However, if there is a cost to the customer for the warranty, the retailer may have less control on customer experience and the whole revenue stream. In addition, the risks associated with the revenue stream are transferred to a third-party provider. It could make sense for your captive insurance company to take on that risk, control the program and customer experience more tightly and capture some of the profits being made by the third party.

Another way retailers are expanding the use of their captive insurance company is through the provision of supply chain insurance. Most retailers have several suppliers providing them with materials and goods, and as part of that cost of supply, suppliers have their own insurance programs. In many instances, the programs are smaller than the retailer’s. Retailers are therefore putting together suppliers’ risks programs and financing them through their captive. That method can remove some of the insurance costs to the supplier.

How can you tell if using a captive is the right choice for your company?

There are trigger points. How comfortable are you managing retained loss costs? Are your business’s retained loss costs at a level where you can absorb some of the frictional costs associated with a formal structure?

A captive structure is a formal mechanism to finance these risks. You are creating an entity or becoming part of a legal entity that is financing these risks, so there will be frictional costs associated with it. Understanding frictional costs and whether your retained loss costs are of the size that makes one of these options worth pursuing is a key aspect to this decision.

How can a risk consultant help companies make that decision?

A risk consultant will look at your program design and try to optimize it based on risk transfer costs and analyzing your loss costs. The consultant will do this to find the optimal level between risk transfer and risk retention.

You also should determine the best way to warehouse those retained loss costs. Can the company pay it from revenue? Do you want to set up a formal vehicle to finance those loss costs? Do you have subsidiaries or legal entities that all pay different premiums? Can you consolidate these costs through a single captive structure? These are some of the issues to examine with a risk consultant.

Review your options and the realistic costs. There might be collateral requirements, such as fronting costs. I recommend working with your consultant on a comparative exercise to determine whether a captive insurance company would help you derive the most efficiency in costs.

How can a company determine which type of captive insurance company to use?

There are a spectrum of captive structures, ranging from the wholly owned, single-parent captive in which a single entity owns 100 percent of the risk, through group-owned captives with multiple owners pooling their risk.

The single-parent captive is likely to be for those businesses that have taken the step of risk retention and are already retaining significant loss costs. Their costs are the size that it makes sense for them to create a full, wholly owned captive.

As a baseline, for a single-parent captive, annual operational costs are likely to be in the region of $75,000 to $100,000. You will want to absorb that cost within the financing of your retained loss costs. If your company is not large enough to take frictional costs on board of a single-parent captive, it might be opportune to consider a group captive scenario or perhaps other related structures, such as a cell company.

Adrian Richardson is managing director of Aon Risk Solutions’ Global Risk Consulting. Reach him at adrian. richardson@aon.com or (212) 441-2020.

Published in St. Louis