Global insurance programs Featured

7:00pm EDT February 28, 2007
More companies are expanding their presence overseas. With emerging markets springing to life and improved technologies making the world a bazaar of economic activity, those with an international presence have an opportunity to earn tremendous rewards.

However, there are corresponding risks to the rewards associated with conducting business abroad. One potential hazard is not having a suitable insurance coverage and employee benefits plan in place for workers overseas.

“It’s important to really understand a global insurance program and not just rely on independent decisions in each country,” points out Jim Kapnick, president of Kapnick Insurance Group.

Smart Business spoke with Kapnick about insurance and employee benefits for companies doing business abroad.

How should a company go about implementing insurance coverage and employee benefits for workers abroad?

The important item to keep in mind when designing an international program is the need for strong communication. Insurance coverages and employee benefits differ greatly in each country and it is important to seek out strong local knowledge of the marketplace. Having a relationship with a local service provider can prove to be invaluable when structuring program design, compliance with local laws and regulations, and — most importantly — providing knowledgeable assistance in the event of a claim.

What are some of the logistical hurdles and how can these be overcome?

The two obvious ones are language barriers and time differences. The biggest logistical hurdle is the effective coordination of an international insurance program. It is important to have a centralized understanding of a global insurance program while still allowing for local (abroad) knowledge and servicing.

Too often, people do one of two things: Either they control the entire program from the U.S., which is not good since they don’t get local servicing and/or knowledge; or they let the operation abroad directly purchase the insurance and employee benefits, which is not a good idea because often the coverage limits are inadequate and it is not coordinated to protect the global company.

It is important to deal with an insurance/employee benefit adviser that has an established global network with formalized operating standards to assure proper understanding and communication of the program.

How has the Sarbanes-Oxley Act affected global insurance programs?

Sarbanes-Oxley has made management more accountable for understanding what’s going on. Too often, people with foreign locations take an out-of-sight-out-of-mind stance in regard to insurance and employee benefit placement. With Sarbanes-Oxley, you can’t do this because there is a responsibility for management to protect assets for investors.

Most overseas locations are very small — just a salesperson or a couple of people abroad, so it is tempting to say, ‘It’s no big deal, let’s just let people take care of it locally.’ But it is a big deal because you’re subjecting the corporate assets. With Sarbanes-Oxley, somebody within the organization has to have a global understanding of the insurance and employee benefit programs being offered.

What factors should a company consider when analyzing its global employee benefits program?

Employee benefits are just that … benefits to employees that entice them to join or stay at a firm. In order to offer a competitive compensation package and attract and retain the best employees, one must have a thorough understanding of the local market.

In some countries, employee benefits are simply providing transportation, a uniform and lunch. In others it involves programs more typical to the United States. Also, in global companies there often are foreign nationals working on assignment in other countries. It is important to coordinate employee benefit package programs to determine which countries’ coverages will respond.

If, upon inspection, the program could be improved, what steps should be taken?

Every global program should be fully customizable; there should never be a cookie-cutter approach. In my opinion, the steps involved include discussing the corporate philosophy regarding ultimate control of the program and then evaluating the local service providers to assure that the improvements can be implemented properly.

How should a local service provider be selected?

One option is to do business with people who have an established network and have experts locally. Another way is to have your people in foreign countries seek out local representation with the understanding that information has to roll up through a master program.

JIM KAPNICK is president of Kapnick Insurance Group. Reach him at (888) 263-4656, ext. 132 or Jim.Kapnick@kapnick.com. Kapnick Insurance Group is a member of Assurex Global, an international network of insurance & employee benefit brokers.