Multinational Benefits Pooling
M. PONZI KAY
3/20/2006
1

Planning ‘The Grid’
• Globalization is here, industry searches for
cost efficient labor that is often times outside
the U.S.
• Companies must look to grow globally in
order to obtain return on investment:
• They must be closer to the market
• They must consider raw materials costs
• They must have the right talent to manage
effectively
2

Key Issues for HR
• According to a recent Hewitt Associates
study (HR Magazine, May 2004) 45% of 500
senior finance and HR execs surveyed said
their firms are offshoring or considering
offshoring in the next few years.
• Only 8% of those surveyed considered their
current offshoring completely successful.
3

Multinational Pooling: Is it Right for you?
• How do I plan the ‘Grid’ a network of providers
supporting my company’s growth?
• How to gather data worldwide to perform an
evaluation?
• Preparing the RFP for the process
• How to evaluate potential pooling providers
• Analyzing the data from the various plans
• Achieving immediate and ongoing savings
• Selling the process internally to diverse
geographic locations/businesses
4

Elements of ‘The Grid’
• International assignment policies to
foster mobility
• Benefits package to support them
• Global operations able to access
equivalent benefits platforms
• Cost-effective consistent plans
• Future cost containment in order to
continue to provide competitive
programs
5

WHAT’S A COMPETENT
HR PERSON TO DO?
6

The Vision: A Grid of Global
Plans
7

What’s your firm’s objective?
• Operations located appropriately to
markets and customers
• Company able to seize the
opportunities for development and
expansion
• Personnel willing to strategically
deploy corporate directives
• Employees able to access standard
benefits platform
8

What is Multinational Pooling ?
•A method of pooling financial experience
across borders
•It is an aggregation of local contracts:
experiences of several countries can be
pooled if local contracts can be written with
insurers who are participating in the same
network
•Local benefits plans / levels do not need to
be changed (only carrier might change)
•Expenses and Risk charges adjusted to
reflect pooling of benefits
9

Key Outcomes for HR
• Maximize efficiencies of employee benefits
programs
• Achieve consistent annual financial savings
(average of 10% of pooled premium)
• Reduce internal administrative work and
costs
• Improve service on global employee benefit
programs through use of limited number of
insurance networks
• Improve management and control of global
risk programs through use of multinational
pooling
10

Key Outcomes of Pooling
Savings through:
Finding new pooling provider or restructure existing
pools
Optimization of current pooled contracts-
reducing risk charges, administration& commissions,
optimization of claims experience, premium levels,
investment returns, local profit share
Review of the contracts that currently not pooled and
identify preferred insurers networks
Proactive management of the pools in the future
11

You must think infrastructure:
What do you currently have in place to
achieve ‘The Grid’?
• Benefits have intricate complexity
• Each country has regulations, state-
mandated benefits, pensions
• How to benchmark?
• How to choose surveys?
• Use internal or external sources
• Applicable tools, software?
12

Cost-Effective Global Benefits
• Conduct an audit of your insurance
programs globally
-Are they set up to facilitate easy
management?
-Do they leverage your size/geography?
-Are they consistent across locations and
boundaries?
- Do they support mobility and growth?
13

Why should a global audit be performed?
•Opens up the lines of communication
about efficiency of the current networks
•Creates a process to identify coverage
gaps and duplications
•Ensures coverage is in alignment with
the larger company objectives
•Facilitates participation of local
companies in corporate growth and
changes required for success
14

Multinational Pooling analysis
Annual
Lives
Country Type of coverage Insurer premium,
insured
USD, 2002
EUROPE
BELGIUM Death/Accident
Retirement pensions Fortis AG 418 1,448,095
Health Ins urance
FRANCE Death/Accident GAN
Health Insurance EUROCOURTAGE 51 115,202
Disability VIE
NETHERLANDS Retirement pensions
Delta Lloyd
Widow's and 107 249,936
Levensverzekering
orphans' pension
NORWAY Retirement pensions
Widow's and Storebrand Life
47 110,530
orphans' pension Insurance Co Ltd
Disability
POLAND Death/Disability Commercial Union 2 1,633
AMERICAS
CANADA Disability Standard Life 78 45,331
Grupo Nacional
MEXICO Death/Accident provincial 33 2,632
TOTAL 944 2,082,359
15

Proposal Phases
Phase I Baseline Analysis Report with:
•Current pool charges
•Analysis of pooled contracts
•Identification of loss leading contracts
•Review of funding Vehicles
•Analysis of non-pooled contracts
•Estimation of ROI expected from expanding and
managing pools proactively.
Phase II Pooling questions and RFP framework
•Analysis of responses
•Attend finalist presentations
16

Proposal Phases
Phase III Negotiate improved pooling parameters
•Restructure pools and set up new contracts for any
pools created
Phase IV Pool Implementation
•Project management
•Globally switching contracts to new network or networks
•Outlining strategy to proactively manage going forward
17

What are the stages in the process?
Stage 1: Analysis of Local Contracts and
existing pooling arrangements, audit and contact with
local insurers (3-4 weeks)
Stage 2: Depending on results of Stage 1,
either identify new provider or plan to
re-structure existing pools; obtain and
review bids from pooling networks (6-8
Weeks)
Stage 3: Implementation: switching of
contracts to preferred network or networks
(6-12 months*)
*existing contracts may have to expire
18

What resources are needed ?
A combination of internal and external resources can be
used depending on current HR/Benefits staffing and
optimizing cost for results.
External expertise can be used at different stages:
• analysis of current financial arrangements
• develop framework and bid specifications
• analysis of bids
• negotiation of improved pooling arrangements
• create strategy for managing pools in the future
Proposals can be considered from consultants, and
providers themselves.
19

What are the questions to ask?
1. How long have they been providing pooling?
2. What is their current portfolio of clients ?
3. How many clients with stand alone pools do they have?
4. How many clients are in small group or multi client
experience pools?
5. What has been the average dividend experience of the
stand alone pools over the last 3 years?
6. Their small group or multi client experience pools over
the last 3 years?
7. What is their structure in serving pooling clients.
8. How are country specific questions answered?
20

What are the questions to ask?
9. Describe a typical accounting cycle. Please confirm if network will
guarantee to deliver the annual pooling report within 6 months of
the end of the last accounting period.
10. Can accounting reports be customized to the client's
specifications?
11. Please detail specifically, by country, any countries and
coverages that are unable to be pooled.
12. Please explain any guarantees you offer on your risk and
administrative charges shown.
13. Please describe what service standards and guarantees are
available.
14. Do they reinsure the pooled contracts risk with a central insurer?
If so, what is the name of the central insurer and at what levels of
risk is the contracts reinsured?
15. Please supply the names of three (3) companies and a contact
person that we may call for references.
21

What are the measures?
Pct. of Measured Countries
100%
95%
95%
90%
92%
85%
80%
75%
70%
65%
60%
Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04
Medical Claims TAT Lif e Claims TAT
Graph 1: Percentage of Measured Countries Meeting Local
Standards on Medical Claims and Life Claims Turnaround
Time (TAT)*
22

Measures: Overall Dividend Projections
Consolidation Using Assumptions
# of Countries pooled
# of Lives
Premiums
Poolable income
Claims
Reserves
Investment Income
Risk Charge
23

The Finalists
Network Overview
Background; Structure and Team
Capabilities
Geographic Match with company
RFP Response
Financials
Questionnaire
Implementation
Procedures involved in setting up new pooling contract
Procedures to set up new local contract
Major tasks, roles, responsibilities and timeframe
Questions and Answers
24

Next Steps
Communicate with your Finance Team
Show the results of the financials
Have them evaluate your analysis
Let them meet the network providers
Communicate with your Country Heads/Regions
Don’t forget who makes this happen
Gain buy in, resolve issues, overcome objections
Implementation
Kickoff meeting for all key participants/contributors
Ensure all contacts/info has been distributed
Set timeframe for results/cost savings
Communicate to organization
25

Ongoing Support
Data Collection
Make sure you have a way to refresh the data
Provide feedback to new networks on any issues
Schedule analysis meeting to check on progress
Updates
Have there been any network changes?
Any world issues that need resolving-entry into new countries,
etc.?
Management Consensus
Remember it’s the discontent outliers who can cause
problems going forward
Stay on top of any disconnects with remote regions and
providers
26

Global benefits deployment
• You have competitive world-class benefits
accessible to employees.
• Your global team is highly motivated due to
being able to access appropriate benefits.
• Your finance team and shareholders enjoy
the cost containment effects on the bottom
line.
• Your ‘high potentials’ profit from the
benefits infrastructure supporting global
displacement and retention.
27

Strategic global benefits
• You can offshore or inshore at will
• You can outsource or insource as you wish
• You can acquire new companies or
operations for growth knowing you can
accommodate benefits plans
• You have just the right plans in the right
place at the right time, you have...
28