How to select a multinational pooling network

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• Look for networks that match existing benefit coverage.
• Conduct a full analysis because the cost-effectiveness of a network varies between organisations and depends on factors such as the type of pool, mix of business and locations.
• Check that management information reporting meets requirements and meet the people running the account because this relationship is vital.

Multinational pooling networks can reduce employers’ costs for a variety of benefits, but they must be sure the arrangements are a good fit for their business, says Sam Barrett

Using a multinational pooling network for benefits such as life insurance, disability cover and medical cover can bring advantages for employers, such as reduced costs and improved underwriting and service. To maximise these benefits, it is essential to select the right pooling network.

Coverage is a key consideration when selecting one of the eight networks that offer access to different products around the world. For example, according to Towers Watson’s 2012 Multinational pooling network matrix, Zurich operates in 64 countries, ING is active in 102 and Maxis in 114.

But finding a perfect fit is not always easy. Barry Perkins, international consultant at Towers Watson, says it is not enough just to know a particular network is present in a particular country. “Employers need to understand whether the details of the products and the services offered match their requirements,” he says. “This can be challenging.”

Some organisations opt for two or more networks or add another one if they set up operations in a location that is not covered by their existing network. But John Russell Smith, client director at Lorica Employee Benefits, says this can work but may have disadvantages compared with a single network. “The more networks [employers] use, the more they will dilute the concentration,” he says. “Unfortunately, this can reduce the benefits, although they may still be better off with two or three networks than with none.”

Cost is also key when selecting a multinational pooling network. The mechanics of using a network should ensure cost savings, but this is not always the case.

Perkins says costs vary widely between networks depending on factors such as the type of pool, mix of business and locations. “A network that is competitive for one [employer] may not be for another,” he says. “In each case, analysis is essential to determine which network is the best fit.”

With multinational pooling also offering potential dividends when claims are lower than expected, the pooling type can also have a significant bearing on the overall cost.

Russell Smith says an organisation with at least 3,000 lives should benefit from a loss-carry-forward arrangement, which has the potential for a surplus of up to 85% of the premium, while those with 1,000 to 3,000 lives are more likely to use stop-loss, where returns can be up to 70% of premiums. “Smaller employers may also benefit from portfolio-type pooling,” he adds. “These allow them to join other small firms to access the surplus sharing benefits enjoyed by larger organisations.”

Service is also critical when choosing a network. For some organisations, an annual report may be sufficient, while others will need to receive data more frequently.

Employers also need a good working relationship with the account managers. “The success of a pooling arrangement is driven, to a large extent, by the people managing it day to day,” says Perkins. “So make sure you can work with them.”

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