What is multinational pooling and the advantages?
Multinational pooling is a way for employers to insure the employee benefits of their local national employees around the world. However, instead of approaching insurance companies in each country on a case by case basis (one by one which is not efficient) an employer uses what is called a pooling network company as a single point of contact.
A pooling network maintains relationships with local insurance companies in many countries. An employer with 1,000 local nationals working in 8 countries can approach the pooling network instead of reaching out to 8 individual insurance companies ad hoc.
Advantages go well beyond lower administration and reducing headache. The pooling network can tie all of the local insurance contacts in each country into one large experience rated agreement to both reduce risk and bring cost savings to an employer by returning surplus.
In our eight country example above, if Brazil, Chile, and Hong Kong “lost money”, Spain, France, Singapore, Canada, and the U.K. may have “made money” and overall a surplus can be returned to the parent company at the end of the accounting year.
On the other hand, if the employer had reached out to local insurance companies on their own, they may have not had a large enough group in several countries to be offered experience rating, and a good claim year in a fully insured, non-participating arrangement does not benefit the employer at year end. It would be like one’s auto insurance. The premium paid does not return if one does not have a car accident.
Rule # 1 – You don’t have to be a Fortune 500 or FTSE 100 with 2,500 or more global employees to benefit from pooling in the year 2010. Perhaps you have 100 local nationals in 4 countries…we can tell you exactly how multinational pooling can be an advantage to your organization.
Insuring local national employees is complicated. A local national is, for example, a Mexican national working in Mexico. Most countries have strict rules on local national non-admitted insurance. This means a global employer must use a locally licensed insurance company to insure Mexican nationals without exception. You can’t use a foreign insurance company, and only a local company will have the necessary license in most cases. The penalties for using non-admitted insurance can be criminal in some countries.
Rule #2 – Local nationals need to be with a locally licensed admitted insurance scheme. You can’t put a Mexican national under Blue Cross of California for example! Penalties can be severe and even criminal.
A multinational pooling network can offer a locally licensed, admitted insurance carrier in each country where local nationals are employed with a single point of contact; a tremendous advantage unless you want to hire a local broker in all 8 countries or do individual negotiations.
If you have 15 local nationals in a country for example (a small group), no one in that country will really covet your business or care much about you. If you have 1,000 local nationals placed in a pooling network, and you only have 15 local national employees in Hong Kong, overall you are still treated like the large customer you are because of the pooling network. The local insurance company in Hong Kong will respond better to the pooling company (that may insure tens of thousands of locals with that insurer). Service to your 15 life group, if standing on it’s own without the network, may suffer.
Rule # 3 – In the countries where you don’t have large populations, pooling can turn a small customer into a larger customer. If you have an insurance contract for 5, 10, or 15 employees standing alone somewhere and negotiated on it’s own, you are at the mercy of the insurance company.
Finally, there are real cost savings associated with multinational pooling. Even in the best of times who can afford to leave 15% in the hands of the insurance company.
Rule #4 – Multinational pooling brings real cost savings which will vary by employer, but never-the-less are significant.
Please contact us for more information or search this website for more detail on multinational pooling.
