4 Maddening Global Insurance Challenges and the Expert Solutions to Solve Them

A constantly shifting collection of risks adds to the complexity of multinational insurance. Here are four of the key challenges, and the approaches carriers are taking to solve them.
By: | October 3, 2019

According to industry research conducted by The Hartford, roughly 80% of U.S. companies have some type of international exposure, but 45% reported their broker never talked to them about international risk.

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That statistic underlies what The Hartford’s head of multinational insurance Alfred Bergbauer says is the single greatest challenge in building and managing a global insurance program — lack of global risk awareness.

Multinational companies’ incomplete appreciation of their risk is not altogether surprising given the complexity of running a business that spans continents and cultures. As a result, “most U.S. companies are uninsured, underinsured or improperly insured for international risks,” Bergbauer said.

The onus is on carriers to educate brokers and clients about their multinational exposure and to spearhead the complicated process of constructing a global insurance program.

Covering operations in multiple countries demands understanding the interconnectedness of risks across geographies, complying with multiple sets of rules and regulations, managing both global and local teams of underwriters, brokers and service providers — all while striving to deliver transparency and a consistently excellent level of customer service.

Technology increasingly helps carriers execute these tasks, but a program’s success ultimately depends on the expertise of the people behind it. Here are the key challenges of building and managing a global insurance program, and the approaches carriers are taking to solve them.

Challenge 1: Gathering Accurate Information

As in domestic programs, underwriters need data to build accurate policies. With multinational programs, the volume of data needed is both greater and more difficult to capture.

While a good chunk of exposure data comes directly from the client, it must be supplemented with information from third party databases, industry-specific benchmarks and additional research on the part of the carrier.

For physical risks, that could include something as simple as comparing the insured’s locations to geographical hazard guides to determine exposure to flooding or severe weather. For regulatory risks, finding up-to-date information is more challenging as rules can shift from day to day.

Solution: Tapping into Local Resources

The most straightforward way to obtain this data is by relying on local network partners that have first-hand knowledge of a country’s legal nuances. This of course assumes that multinational carriers have cultivated a network of reputable firms with demonstrated track records of compliance.

For faster and sometimes more complete information, insurers also turn to website scraping.

“In addition to our own network, we are also relying on large information providers that are best equipped through technology like web scraping to sift through the changes and updates being published on local websites,” said Sonja Ochsenkuehn, head of global programs, AXA XL.

“You have to do your due diligence,” Bergbauer added. “Sometimes that means seeking information in creative and innovative ways.”

Challenge 2: Organization and Program Management

Finalizing a program involves a lot of steps. All parties must agree on premium allocation — the percentages of premium that stay in a local country or come back to the U.S. Instructions for local policy issuance must be communicated to local network partners and confirmed. Processes for invoicing, payment and claim status tracking must be established.

Ticking off the checklist is an administrative beast requiring coordination of global carrier and broker, local carriers and brokers, a central contact at the client company and representatives at local sites. There’s a lot of back-and-forth and documentation to track.

“You need to be able to see who’s doing what,” said Sylvain Bouteillé, managing director, global co-head primary lead initiative at Swiss Re Corporate Solutions.

If contract certainty is a requirement, it takes significant advance planning, the burden of which falls on the global carrier to execute.

“Contract certainty is particularly difficult with multinational insurance because of all these moving parts, but it comes down to effective program management. The carrier or broker should manage all activities from end to end, leading preparation and collaboration of all parties from start to finish,” said Ryan Gustafson, North America head of multinational, AIG.

“If you want implementation and policy issuance completed by inception, lay out all of the timelines and responsibilities required to get there.”

(Potential) Solution: Blockchain

Blockchain may eventually find a place in this arena. Because it organizes processes in a linear fashion, requires all stakeholders’ approval before linking another “block” to the chain, and serves as a repository for critical documents, blockchain shows a lot of potential as a tool that almost forces collaboration and transparency.

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“There are a number of things that could be addressed with blockchain,” Ochsenkuehn said.

“Obtaining information in the pre-bind phase; getting timely agreement on what the premium allocation should be by local country; communicating instructions to the network; the cash collection process are all common pain points in the global program process.”

“Contract certainty is particularly difficult with multinational insurance because of all these moving parts, but it comes down to effective program management. The carrier or broker should manage all activities from end to end, leading preparation and collaboration of all parties from start to finish.” — Ryan Gustafson, North America head of multinational, AIG

AIG successfully piloted the first “smart” multinational policy using blockchain in 2017 for Britain-based global bank Standard Chartered. A controlled master policy and three local policies were incorporated in the blockchain, allowing the insurer, client and broker access to a real-time view of data input documentation updates.

According to a press release announcing the pilot, “this allows visibility into coverage and premium payment at the local and master level as well as automated notifications to network participants following payment events.”

Insurers are still in the early stages of determining how best to implement blockchain to organize and streamline processes, especially as the technology continues to evolve, but it seems likely it will eventually serve a greater purpose in multinational insurance.

For now, program management depends on organizational skill and clear communication channels.

Challenge 3: Transparent Communication and Quick Customer Service

Clear, proactive communication and transparency are key to keep everyone on the same page and moving forward. A multinational program requires many moving parts working together, and if one of those moving parts is not communicating, things can quickly go awry.

Questions or concerns from local parties are inevitable, and these constituents need to know how to communicate with the central insurer in order for a master program to run smoothly.

Gillian Gunnink, SVP, strategy and client engagement leader, international business, Swiss Re Corporate Solutions

“Let’s say a central U.S. broker sends out policy instructions to a local contact in Germany, and that contact believes there should be some other coverage that’s missing. If they only communicate that at the local level, the central components of that program aren’t getting involved to solve it,” said Gillian Gunnink, SVP, Strategy and client engagement leader, international business at Swiss Re Corporate Solutions.

“That disgruntled local customer may feel they can place the program better with the local broker across the street,” she said.

“If you don’t have the transparency and quick communication needed to resolve that issue, what was a small concern ends up dismantling a part of the program.”

Laura Vest, senior vice president, Chubb Global Casualty, said, “The best way to create this transparency is through utilization of technology. I think that everyone is trying to work towards that. It’s a simple concept but difficult to do well.”

Solution: Legacy-Free Platforms

The most common solution to the transparency challenge is a customer portal that gives every party a holistic, real-time view of their program and a centralized method of communication. Every carrier has their own version, but two unifying factors are the absence of a legacy system and consistency across locations.

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Swiss Re Corporate Solutions made an intentional decision to build their multinational platform from scratch in order to avoid the siloes common in older systems.

“Without siloes throughout different divisions or departments or countries, we were able to put in a fully integrated platform which to my mind is a huge game changer,” Bouteillé said.

“It gives the customer the ability to see from beginning to end where all the parts of the puzzle are.”

Ditching a legacy platform also enables speed and agility — critical to the delivery of excellent customer service. “When we have conversations with other stakeholders, we can act on their feedback quickly, and that’s mostly due to the lack of a legacy system,” Gunnink said.

Creating a consistent customer experience around the globe also streamlines communication. Chubb, for example, requires all of its network partners — whether they are owned entities or third parties — to use its Worldview platform in order to reduce the likelihood of error and minimize confusion.

Challenge 4: Navigating A Continually Changing Regulatory Environment

A decade ago, one controlled master policy may have been sufficient to cover a company’s risks anywhere in the world. But as the world became more interconnected and business more globalized, local governments were quick to realize that allowing foreign countries to be covered by unlicensed insurers was robbing their countries of local investment and tax revenue.

Today, there are very few countries that do not require licensed, locally admitted policies, and regulators around the world are cracking down on enforcement. Audits are conducted more frequently. Regulators are entering into bilateral and multilateral agreements, working together to identify unlicensed insurers.

Laura Vest, senior vice president, Chubb Global Casualty

The consequences for an alien insurer are severe. In addition to large fines and penalties, the global insurer and broker both can sustain significant reputational damage. The insureds property can be seized and its operations suspended. Any claim payments they receive may be taxed as income — cutting their reimbursement by at least 20%.

Tracking regulatory changes around the world is a monumental task, and it’s only grown more complicated in today’s uncertain political environment.

“As you see more protectionism, governments are changing how they allow you to do business in their country. For example, several are increasing the requirement for how much premium has to stay in their jurisdiction,” said Chubb’s Vest.

“Countries are adopting different tax schemes, and they’re becoming more aggressive in how they establish and enforce their monitoring of premium paid locally.”

The most frequent and dramatic regulatory changes occur in emerging markets.

“Local controls are being strengthened in less mature markets like the Middle East, Africa and Vietnam,” Ochsenkuehn said.

“These environments change more fluidly. And staying on top of these changes and managing their impact on the client is critical.”

Solution: Real Time Reporting and Databases

According to Bergbauer, “There is nothing more powerful than the input of local partners to track regulatory changes globally.”

Their feedback, combined with information gleaned from claims data and data scraping technology, helps to generate a real-time view of regulatory changes. But carriers still need a central system that can house, sort and continually update this information.

“As you see more protectionism, governments are changing how they allow you to do business in their country. For example, several are increasing the requirement for how much premium has to stay in their jurisdiction.” — Laura Vest, senior vice president, Chubb Global Casualty

The Hartford’s in-house country guide is one example. The database details attributes like local underwriting environment, market characteristics and insights on local legal systems. Chubb’s Worldview platform distills local requirements on a country-by-country basis.

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“If a client is interested in sending people to France or acquiring a company there, they can go to our portal and look up France. It will tell you exactly what the requirements and expectations are for that country. So a client can be well-prepared before they make that decision,” said Matt Merna, division president of North America major accounts, Chubb.

“In order to issue policies locally and compliantly, we have to constantly update a database of over 1 million data points. What worked well last year may not work well this year,” said Gustafson.

AIG’s database takes a more global view of client regulatory risk: “It takes those million data points, looks at a specific client and creates a bespoke client brief which displays a heat map showing unique program requirements in each jurisdiction,” Gustafson said.

Expertise Remains Central to Success

The pool of carriers and brokers that can execute a multinational program well is relatively small, and that’s because even the best methodologies and technologies can’t deliver without the foundation of ample talent, resources and financial strength.

Matt Merna, division president of North America major accounts, Chubb

“It gets complex, and you have to have experience and the global network to manage that. We have 150 people who only service U.S.-based multinational accounts for us, and more than 625 offices around the globe that we can access for local information. It’s a huge investment, and that’s what it takes,” Merna said.

“It starts with a CEO backed by a board that understands the nuance and subtlety of a global business and is committed to serving clients. It has to come from the top down, you have to have a global risk mindset across all your teams (underwriting, legal, regulatory, compliance and operations) and the internal consultative capabilities to offer insight to clients and broker,” Bergbauer said.

“Otherwise, you’re just dabbling.” &

Katie Dwyer is a freelance editor and writer based out of Philadelphia. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

The Betrayal of Elizabeth

In this Risk Scenario, Risk & Insurance explores what might happen in the event a telemedicine or similar home health visit violates a patient's privacy. What consequences await when a young girl's tele visit goes viral?
By: | October 12, 2020
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

PART ONE: CRACKS IN THE FOUNDATION

Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.

Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.

Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.

But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.

First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.

Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.

Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.

Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.

“Sounds dreadful,” she said to herself.

Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.

It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.

She felt like she was suffocating.

One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.

Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.

Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.

Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.

“So can you tell me what’s going on?” she said.

Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.

“It’s just… It’s just…” she managed to stammer.

The doctor waited patiently. “It’s okay,” she said. “Just take your time.”

Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”

More tears streamed down her face.

Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.

“Okay,” Elizabeth said, some semblance of relief passing through her.

Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.

PART TWO: BETRAYAL

As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.

Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.

#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.

Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.

By noon of the following day, her well-connected father unleashed the dogs of war.

Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.

“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.

“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”

“Great. Thanks, kid,” Rand said.

“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.

It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.

Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?

He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.

He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.

PART THREE: FALLING DOMINOES

Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.

In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:

Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.

The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.

Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.

Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.

The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.

Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.

That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.

“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.

There was a long silence from the underwriters at the other end of the phone.

“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.

Rand just sat silently and waited for another shoe to drop.

“Well, what can you do?” the broker said, with hope draining from his voice.

The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.

Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.

Medwell’s relationships with the insurance markets looked like it almost never would. &

Bar-Lessons-Learned---Partner's-Content-V1b

Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?

Risk Management Considerations:

The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:

  • maintain a strong patient-physician relationship;
  • protect patient privacy; and
  • seek the best possible outcome.

Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.

A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.

This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.

This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.




Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]