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YOUR INTERNATIONAL BENEFITS - Part III
by Richard Polak
Until recently, Multinational pooling
was only available for groups over 100 employees.Now, emerging multinationals can benefit with as low as 10 employees in
Pooling is a system of bringing together the insurance coverages of selected
worldwide benefits into one or more POOLS to achieve experience rating and
highlight the word “selected” because we generally wouldnâ€™t include funded pensions
and certain medical plans.
Multinational Pooling started as a
means to extract the margin on over-priced insurance rates.The excess is returned to the policyholder at the end of each year.Because of Tariff rates (rates prescribed by law), multinational
pooling became the only means to “skim the cream off the top” that the
insurance companies would normally pocket as profits.Below are other advantages:
Example of the Potential Savings
follows is an exhibit outlining the potential savings of multinational
pooling. The results can be staggering.We
recently assisted a company with their multinational pool, which yielded them
savings of over $800,000.
Assumptions for the above numbers:
Country 1 does not permit dividend due to small
size of the group.
Country 2 is a tariff-rated country.
Country 3 holds the margin
Pooling; Phase I - Setting Objectives
The first step is to set
objectives.Your company must
prioritize the following items in order of importance:
·Improved underwriting terms
·Increased control over local
·More complete information for
·Detailed financial data each
·Greater ease of transfer of
benefits for employees (TCNs) from one country to another
Pooling; Phase II - Data Collection
Crucial to any study is
accuracy of the collected data.In
this case it is relatively painless.A
simple form identifying the companyâ€™s insurance financial picture for each
country is all that is needed.The
forms are collected and summarized.They
are then submitted to the insurance networks for a bid.
Pooling; Phase III - Analysis
results of the bids should be reviewed quantitatively as well as
to consider service in addition to costs.In addition, simply by conducting a pooling study many other
a.Reducing aggregate premium costs where feasible
b.Increasing or providing full experience rating of coverages and claims
in locations where normal experience rating is not permitted due to size or
c.Reducing insurance expenses in administering the plans
d.Optimizing interest credits on both premiums and reserves
e.Reducing risk charges due to an increase in premium volume
f.Lowering actuarial margin requirements
g.Evaluating the movement of TCNs who transfer from country to country
h.Providing an improved surrender value on pension assets
i.Liberalizing any restricted underwriting requirements
j.Optimizing any financial arrangements that are not being considered or
creating new approaches for cash flow purposes
k.Determining the opportunity for greater leverage with one or more
l.Simplify administrative time and expense by choosing insurance
companies for future locations
m.Creating administrative guidelines to follow so the pool will prosper
in the future
Players in the Market
Insurance Companies with branches: Swiss Life, CIGNA.
with foreign partners: Aetna Generali, AIG/Winterthur.
Associations: Insurope, GAIN, IGP and MIA.
Pooling: Phase IV - Implementation
Once a Network or Networks are
chosen, the transition to the new local insurers needs to occur.You will need to ensure that the plans are taken over on a
no-loss; no-gain basis.Much of
this is negotiated during the marketing phase.However, inevitably there are local carriers that will not adhere to
this policy.Each country must be
delicately transferred to the new carrier.An International Consultant can oversee this transition.
plan - Regardless of the country a plan should be established on how to
tackle the benefit programs.
yourself time - Donâ€™t forget that international issues invariably take
longer to accomplish.
assistance early - The sooner you get the proper advice the easier your job
will become.Donâ€™t get stuck
with promises that canâ€™t be kept.Get
Flexible - While weâ€™d like everyone, everywhere to do business at our pace
and manner, it simply is not the case.
local relationships - There generally isnâ€™t a reason to be terribly
concerned, but beware of what is being recommended when it comes from your
local office along with their local consultant.
Be Creative - Take advantage of the flexibility and
less restricted local laws.Itâ€™s
an opportunity to design some exciting packages for employees.
is President and CEO of Polak International Consultants, Inc. During the
past five years the company has grown to include consultants in Los Angeles,
Santa Clara, San Diego, St. Louis and Miami with affiliates in over 60
countries. In Mr. Polakâ€™s 23 years of consulting experience he has
advised over 200 multinational organizations in the areas of international
management, human resources, compensation and benefits. Some of those
Avery Dennison; GTE; Netscape
Communications; BMW; Hilton
Hotels Corporation; Occidental
Petroleum; Caterpillar; Intel; Pan
Pacific Hotels and Resorts; Church
of Latter Day Saints; Janus
Mutual Funds; SAS
International Hotels; Computer
Sciences Corporation; Magnavox; Sun
Disney Company; Discovery Channel; Microsoft; World Vision; Fluor Daniel; NEC
America and Worldwide Church of God.
Polak has consulted management on their overseas operations and conducted
studies in all areas of international human resources including design and
implementation of overseas pension programs; benefits and compensation for
expatriates and third country nationals; multinational pooling; consolidation
through mergers and acquisitions; administration; communication programs and
corporate policy development.
to forming Polak International Consultants, Mr. Polak was the Western Regional
Manager of Foster Higginsâ€™ international practice (now William M. Mercer).
While there, he built the largest department outside of New York, which
managed 73 international accounts. He
holds a Bachelor of Science degree in Business Management and Mathematics from
Alfred University in New York with continued studies at Columbia University,
The New School for Social Research and UCLA.
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