International work and travel are an integral part of the daily operations of multinational companies. The world economy is in a new phase of globalisation, in which companies are turning away from the more mature markets and seeking growth and lower roduction costs in more remote places.
Employees are working in, expatriated to, or travelling in all the corners in the world, away from familiar surroundings, with larger risks to their health, safety, and security. We can clearly see that new business travel ‘claims hotspots’ are developing into, for example, Asia and South America.
Urbanisation and the development of more efficient transportation infrastructure also leads to larger or new risks, such as growing exposure to traffic accidents and faster spread of diseases. The need for evacuations will rise due to effects from climate change.
All these recent trends in our societies leads to an increased exposure of the liability that companies have for the legal and moral duty of care towards their employees.
Global business travel programme
Having a global business travel programme is an efficient way to handle the insurable travel risks. However, the jurisdictional spread included in a global programme increases the regulatory and fiscal risks, as well as the exposure to loss of reputation.
Compliance with local insurance regulations and laws is of increasing importance for international companies, as well as for their auditors, their insurance brokers, and their insurers.
A single insurance policy
To buy a single insurance policy to cover the travel risks around the world with local claims services would be the ideal solution, but the regulatory environment is preventing this. In some countries, non-admitted travel insurance is permitted, such as in Chile, Canada, and Hong Kong, and no problems arise.
However, there are an increasing number of local regulations that prohibit domiciled residents or entities from purchasing insurance from a non-local/not locally licensed insurer, as in Russia, India, and China, and in large parts of Latin America and Africa.
Some jurisdictions have hybrid regulations that allow some local risks to be insured by unauthorised insurers, while demanding regulatory oversight and imposing taxes.
In some countries, like Brazil, it can be allowed for international travel but not for domestic journeys. There are also several countries where the laws are less clear on this subject.
International agreements have also increased influence on the compliance situation. Without any global standard for insurance regulation, or a consistent application of insurance law worldwide, a compliance analysis must be made for each global insurance programme.
Insurance regulations and taxes
Due to the recent global economic downturn, governments are more eager to generate revenue from other sources by using insurance regulations and insurance taxes.
Many historically protectionist measures are being revisited, and a number of enforcement activities have started from the authorities in, for example, India and in Brazil.
The penalties for breaking the regulations vary; they can be very severe and must now be regarded as a realistic threat.
Several questions to be discussed
When designing a global travel insurance programme, there are a number of questions to be discussed and agreed upon by all parties involved. Here are some of the important issues.
- Insurance regulations and experiences from supervisory authorities? Is non-admitted permitted? Compulsory insurance? Taxes and charges?
- Insurer’s local underwriting expertise, partner network, and capacity?
- Is there a need to use financial interest cover to close the coverage gaps?
In circumstances where non-admitted insurance is not allowed, claims can be paid to the parent company under the master policy, based on the parent’s financial interest in its local subsidiary. Under this structure, the parent will receive indemnity for its own loss, not the loss of its subsidiary.
The amount of the payment will be calculated by reference to the local loss, and the parent may then choose to reimburse its subsidiary or affiliate for the local loss.
- Administration of insurance certificates for visa purposes and travel insurance cards?
- Is the claims process adapted to the local legal demands? How will the claims handling process work? Assistance service set up? Central or local contacts?
No one single approach
There is not one single approach to solve all these issues in designing good global insurance coverage and meeting all the compliance demands. The combination of an effective programme structure and perfect compliance is, unfortunately, not really possible.
In order to support the quite complex process of making a customised design of a global travel programme, If has developed a Nordic administration model with checklists and templates. The network managers in our International Operations Unit ensure that we have a growing international network of locally licensed insurance partners in a large part of the world, who accept business referrals from If and will serve our clients locally according to our service standards.
We have internal and external compliance advisers to analyse the regulatory and fiscal issues. Our growing experience shows that this is a well-functioning set up.
A good solution inceases the safety and care
As the world is becoming more and more unsecure, the demands from employees to their employers for good solutions will increase regarding their safety and care, when they are sent out on business travel and assignments.
An important part of the solution is for the company to give employees access to an insurance solution with high-quality benefits at the same level for all, and with practical, efficient claims administration. It is possible to do this without the risk of running into large compliance complications by building a balanced global insurance programme.