George Bashaw – Atlas Global Benefits
With pressure from the C-Suite, HR is walking a tightrope to reduce cost and provide equal or better benefits. Multinational pooling is one option to consider for a company that has multiple international locations. This blog is Part 1 in a series of suggestions to reduce cost without sacrificing the quality of benefits.
Multinational pooling is a contract in which a corporation with two or more locations can spread insurance risk by joining a larger pool of insureds. This contract is facilitated by a pooling network which has a network of providers in various countries. Pooling can be used to spread risk for a number of employee benefits including medical, life, and disability insurance.
Many pooling networks require a minimum of ten employees per country. Therefore, pooling can be a great way for smaller companies to provide consistent benefits, reduce administration, and save money.
How Can Multinational Pooling Reduce Cost?
Since the pool consists of a large group, the risk is experience-rated instead of fully insured. The nature of an experience-rated contract eliminates some of the administrative costs and margins of a fully insured plan.
Providing the experience is good (determined during due diligence), the premium may be less. If the corporation decides to participate in a pool and the experience is favorable, a dividend payment is received at the end of the year. If the experience is poor, it may be mitigated by stop loss insurance, or the balance will be carried forward and can be recovered by future dividends.
Additional Benefits of Multinational Pooling
Underwriting small groups is always challenging. By pooling with a larger group, there are better guarantees, limits, and benefit offerings. This allows smaller groups to meet a common objective: consistency in benefits. Additionally, the pooling arraignment will likely provide enhanced financial reporting, consistency in communications, lower acquisition costs, and reduce the burden on HR.
Multinational pooling is not for everyone. Due diligence with a few pooling networks can determine the pros and cons. As this is a complex, technical area, it’s always best to work with a benefits professional with experience in this area.
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