Key Considerations for Employee Benefits Optimization

SUMMARY

With an increasing number of clients looking at captives for their employee benefits (EB) strategy, it has become clear in this panel that good communication and strategic alignment between all internal stakeholders are key success factors for a successful implementation and value delivery for both, risk managers and HR professionals. From a provider perspective the future focus will lay on long term partnerships and services on top of the traditional coverage to help multinational companies to more proactively manage EB and cost containment.

Breaking the ice for a series of panels at the virtual edition of the European Captive Forum, I had the pleasure of moderating the discussion between EB captive experts: Deyna Fang (Cummins) from client side and Mattieu Rouot (MAXIS) and Ludovic Bayard (Generali), representing the provider’s view. In the following, I will give a brief summary of my understanding of our findings.

THE CLIENT'S VOICE

My objective was to give the audience valuable insights into a client’s point of view, especially with regards to the key success factors of an EB captive program.

Looking back

Cummins, a global provider of backup power solutions for the data center industry, started to explore the concept of an EB captive program five years ago. After tackling the two main questions of which countries and which lines of business first, the program was implemented via a three year enrollment plan, covering all lines of business on a global level. The strategic decision was based on the good experience and already collected data from a previous implementation of a P&C captive. Two network providers were chosen to match the company’s global footprint. Cummins identified the joint approach of HR professionals and risk managers and good internal communication to regional leaders as key success factors. Although the real impact of the current Covid-19 pandemic is only to be seen next year, the EB captive has already proven its value through its flexible support of the global HR strategy in difficult times as well as the possibility to diversify risk in a purely P&C captive.

Looking forward

Cummins is planning to further develop the program by including topics as the local HR strategy, e.g. talent hiring and retention, data collection for wider analyses and future trends regarding coverage extensions, as well as the wellness strategy, e.g. telemedicine and mental health initiatives to be implemented globally.

THE PROVIDERS’ VOICE

Here, my intention was to provide the audience with information on the unique selling points of captive programs as well as with a brief glimpse of the programs’ future from a provider perspective.

Looking back

Covid-19 has accelerated the trend of multinational companies to look at captives as part of their EB strategy, the pandemic being a testimony of the importance of controlling EB programs centrally. Both Generali and MAXIS see the following benefits of a sophisticated risk management approach:

• Governance - a captive brings peace of mind for the governance of local schemes, in the sense of centralized governance that respects local compliance, and allows to align the interests and views of several stakeholders in the company: HR professionals for employee engagement and the design of benefits, Risk Managers to manage risk and CFOs to keep the huge budget of EB programs under control
• Flexibility – a captive gives the possibility to decide on the structure of the benefits, e.g. by waiving exclusions in COVID times, and driving EB, e.g. by including wellness
• Transparency – a captive generates data visibility and oversight
• Cost control – EB risks are less volatile than P&C risks and contribute positively to risk differentiation within the captive portfolio

The EB captive program is not suited for every company though, as it needs a degree of maturity, risk understanding, risk appetite and centralization on client side. It also needs to break the silos between HR and Risk Management as the alignment of interest among internal stakeholders is a preliminary condition for the success of the program.

Looking forward

Regarding the question of future developments in the captive space, providers are ready to move from the traditional insurance approach to a partnership approach. Whilst the focus in the past was on operating the captive business, the focus in the future will lay on offering value added services via long term partnerships. And whilst the focus in the past was on reporting and health, the focus in the future will be on new technologies, e.g. blockchain as well as on pension, disability and wellbeing - financially, physically, and emotionally.

For me as moderator it was a great pleasure to prepare this panel and to steer the thought exchange among the renowned captive experts and professionals. I believe that the best practice sharing from client side gives very good insights to the market and could be helpful for other companies that are planning to start their EB captive journey. I can also observe a harmonized approach among insurance providers, including Allianz Global Benefits, in identifying long term partnerships and services on top of the traditional coverage as key factors to help multinational companies to more proactively manage EB and cost containment in the future. Last but not least I would like to thank the panel participants for the fruitful discussions and Captive Review for offering the virtual platform in COVID times. I look very much forward to resuming the thought exchange and discussion at the life events in June next year.