Service Spotlight: Multinational

8 Questions for Dawn Miller

An insurance executive shares how foreign companies can overcome the unique challenges facing an expansion into the U.S.
By: | April 2, 2018 • 5 min read

The United States is widely considered the land of opportunity for a reason. Many international companies recognize the benefits of staking their claim in the U.S. market, but the regulatory and insurance landscape can make the move challenging. In this Q&A, AXA Insurance Company CEO Dawn Miller discusses the unique risks facing inbound firms, and how insurers can ease the transition.

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R&I: Why is 2018 a particularly attractive time to expand into the U.S.?

Dawn Miller: The U.S. has always represented a good opportunity for foreign firms because of the size of the market — in 2016, the U.S. attracted $3.7 trillion in foreign direct investment. But there are a few trends that make this year a particularly good time to make an international move. For one, unemployment is at record lows and the economy remains on a slow but steady upward trajectory.

There’s also the potential for recent regulatory and tax reforms to foster domestic manufacturing and ease international trade. Additionally, Chambers of Commerce across the U.S. are always seeking to pull in new businesses by offering a variety of services and incentives.

R&I: What sectors or markets are most attractive right now?

DM: Most foreign investment in the U.S. is focused on the middle market. According to the National Center for the Middle Market, this segment reported a 7.6 percent revenue growth in the fourth quarter of 2017 over the previous year and represents the third-largest global economy. Data from the Organization for Economic Cooperation and Development shows that manufacturing attracts the most investment dollars by far.

According to the National Center for the Middle Market, this segment reported a 7.6 percent revenue growth in the fourth quarter of 2017 over the previous year and represents the third-largest global economy.

R&I: What are the business risks these companies might face when expanding to the U.S.?

DM: Regulatory compliance is a challenge because there is a mix of federal, state and local law to contend with, and state and local ordinances can vary widely. You have to know your jurisdiction. There may be different tax codes, different financial reporting procedures, differences in employment law, and so forth. Not complying with those requirements can open up any company to massive legal liability exposure.

Duty of care is another commonly overlooked obligation. If a foreign firm is sending employees to the U.S. to get a new business or branch up and running, how will they protect those workers so far from home? There must be procedures and resources in place to provide care if or when it’s needed.

Language barriers amplify those risks. Lack of effective communication or understanding only increases the likelihood that something will be missed. The due diligence aspect of expanding into a new country is quite significant.

And on top of the commercial risks, there’s also insurance risk.

R&I: What are the biggest insurance and risk management risks?

DM: The biggest risk is assuming that a domestic policy will cover you abroad. Coverage may not extend beyond the borders of the issuing country, and even if it does, your jurisdiction in the U.S. may require different limits or broader coverage.

There are different risk transfer mechanisms, and firms have to re-examine what structure or approach will benefit them most and keep while keeping them in compliance.

Differences in contract terminology can also affect how a foreign policy will be interpreted in the U.S. Definitions of admitted versus non-admitted may vary in the U.S. from a European market. Self-insured retentions and deductibles may offer different advantages and disadvantages. There are different risk transfer mechanisms, and firms have to re-examine what structure or approach will benefit them most and keep while keeping them in compliance.

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Policy wording can create confusion as well. What’s the difference between “business interruption” and “loss of use”? What is the difference between your equipment “replacement cost” versus “insurable value?” There are many technicalities to work through.

R&I: How should companies prioritize and tackle the due diligence work?

DM: Given that many international firms looking to expand into the U.S. are mid-size companies, addressing both the commercial and insurance risks is a big demand on their limited resources. And what usually happens is that risk management is relegated to the placing of insurance, and it drops down on the priority list. With so many other operational challenges to overcome, the due diligence team wants to get coverage in place and get it done quickly so they can move forward. So they buy a policy and check the “insurance” box.

But this misses a vital opportunity to leverage domestic risk management resources that can help them address both the business and insurance risks they’re facing.

R&I: How can incoming international firms get connected to the right local resources?

DM: U.S.-based insurers should be able to connect their clients with the best local resources. AXA Insurance Company has several domestic partners who can help international companies understand and mitigate their exposures. To protect physical assets, such as properties, equipment and supply chains, we work with AXA Matrix. AXA Matrix is a risk engineering firm that can help companies evaluate the value of their assets and their level of exposure, and suggest ways to mitigate it beyond just buying more coverage.

To protect employees, we partner with AXA Assistance. They provide security alerts and travel tips, and can facilitate medical care for employees abroad by leveraging a global network of fully vetted medical providers. They make fulfilling duty-of-care obligations streamlined and straightforward.

Adopting an ERM framework can help even companies that run lean to anticipate the hazards they might encounter with any given opportunity.

At the end of the day, the carriers that provide the best service for a company’s most important assets will build the long-lasting relationships that support continued growth. We’ve built an on-the-ground support network for companies once they land in the U.S., so they know who to turn to when they have questions.

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R&I: What else should inbound companies do from a risk management perspective?

DM: Risk management should be built into any business’s strategic decision-making. Insurance is only one part of that. Adopting an ERM framework can help even companies that run lean to anticipate the hazards they might encounter with any given opportunity. Technology has a role to play here. Platforms that connect and streamline internal functions can facilitate communication and make sure every department has input on strategic decisions. Everyone has a different perspective, and an interdisciplinary approach to decision-making can uncover both potential problems and innovative ways to address them.

R&I: While we know you are focused on helping international companies come to the U.S., what is your favorite international destination to travel to?

DM: I have been fortunate to travel and reside in quite a few countries around the world. I have a soft spot for places like South Africa, Dubai and Istanbul but London is my favorite city. I find London to be the epicenter of global trade and culture. &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.