Priorities have shifted as a result of the pandemic, with employers’ and employees’ expectations changing significantly. For large multinationals, this has meant a rethink on benefit strategies and global solutions, such as multinational pooling and captives, becoming valuable options.
Although Covid-19 affected every country differently, with a diverse range of strategies deployed to deal with it, some common trends are being observed in the employee benefits space. “The pandemic has made employers think more about taking a global approach to benefits,” says MAXIS Global Benefits Network head of underwriting Nicola Fordham. “Risks are diverse and can naturally offset each other, as each country, employee population and product line are all having different experiences.”
Taking a global approach has several benefits, with the financial ones particularly compelling. As well as taking advantage of economies of scale, when claims costs are lower than expected on a multinational pooling arrangement, the company receives a dividend.
With some sectors such as travel, construction and retail brought to a standstill during the height of the pandemic, these savings would have been important. “Multinational pooling can benefit global companies that wish to use their scale to manage the costs of employee benefits plans,” says Dave Parker, head of scheme underwriting within group protection at Canada Life. “This focus on cost containment may have intensified for some companies during the pandemic but it’s too early to determine whether it has generated greater pooling activity.”
While the benefits of pooling are trickling down to the mid-market, setting up a global programme takes time, with considerable groundwork required before an organisation can make the switch. The commitment required means that key components include a centralised approach to benefits and a long-term benefits strategy.
In spite of this, global benefit providers are already reporting an uptick in business. Insurope chief executive Morten Unneberg says that although insurers were concerned about renewals at the beginning of the pandemic, the market remained buoyant. “We signed up a lot of new pools over the pandemic,” he says. “Last year was an exceptional one for us in terms of new business and this activity has continued into 2021. We also received more requests from insurers to join the pool.”
The financial benefits of a global approach may have been compelling for some organisations, but Barry Perkins, partner, financing and carrier relations leader at MMB Multinational at Mercer, believes a broader trend was also at play. “The more consistent theme we saw across the market was the importance of looking after employees,” he explains. “Early on, this was fairly basic but as everyone’s understanding of the pandemic grew, employers undertook much more details examinations of the cover they had in place.”
Tom Laidler, regional distribution manager, UK & Ireland for Zurich Global Employee Benefits Solutions, agrees. He says the pandemic exposed gaps in organisations’ employee benefits, particularly healthcare in regions which have weak state systems. “Employers were able to see where their healthcare benefits responded and assess gaps in provision, with some taking action to address this,” he explains. “Employees now also expect more from their employers, especially around their health and wellbeing.”
This shift in employee expectations is also highlighted in a survey from MAXIS Global Benefits Network. This survey, which was conducted in 2020, found that 46 per cent of employees had reappraised the value of the benefits their employer offers as a result of Covid-19. In addition, a third of respondents said they wanted their employer to focus on health benefits rather than lifestyle ones.
Cover and claims
The focus on health, coupled with the growth of home working during the pandemic, has also resulted in more demand for digital healthcare services. “We’ve seen a huge growth in services such as telemedicine, employee assistance programmes, chronic disease management and musculoskeletal services,” says Fordham. “Employees are now used to accessing healthcare online, from the comfort of their own home, and we only expect demand to continue growing.”
This focus on employee health is positive but it also brings concerns about how the pandemic will affect future claims levels. Morten explains: “Lots of people didn’t see their doctor during the pandemic so claims were down. As everything goes back to normal, claims may increase especially around areas such as disability and mental health.”
It’s an area that Perkins is watching closely too. He says that insurers were saying there was a lot of pent-up demand for medical treatment this time last year, but this hasn’t necessarily fed through. “Some treatment that was delayed will hit the system but other conditions will have resolved themselves and won’t become claims,” he explains. “The real concern is with long-term disability claims. These will take time to come through but insurers are already talking about loadings on premiums as they fear there will be a steep increase in claims.”
The pandemic has also accelerated the trend for extending benefits to non-traditional workers such as contractors, freelancers, gig workers and global nomads. “Multinationals are relying more and more on non-traditional workers alongside those with a traditional permanent contract,” says Fordham. “Multinationals have started coming to us in recent months, asking how they can prepare benefits packages for all their workers – whether they are technically ‘employees’ or not.”
There’s also a huge protection gap across this group of workers, especially around pension and health benefits. Providing them with benefits would help to address this, while also enabling organisations to retain this talent more effectively.
This trend to extend benefits also fits well with the drive for equity in benefits that Perkins says is shaping strategies. “These workers deliver value to the business so it makes sense to provide them with similar benefits,” he says. “Companies may take a different approach with them, such as offering voluntary benefits, which can be difficult to include in a multinational pool.”
Fordham is also exploring how companies can extend benefits to this group. “By using technology and curating a suite of appropriate products and services, we can enable this group to access flexible benefits and help multinationals retain their best non-traditional workers,” she adds.
Alongside changes to the types of benefits and workers covered by a pool, there’s also been a shift in the arrangements that multinationals are considering for their employee benefits. Laidler says that while pooling remains a relevant tool for certain multinationals, the more centralised larger multinationals are increasingly considering other, more sophisticated financing solutions. “Some multinationals don’t want the issues associated with the distribution of dividends with pooling, so they’re looking at other options,” he explains. “Global underwriting and captives give them more control over the benefits and greater access to data.”
As an example, through either of these, an employer could adjust benefits to support its diversity and inclusion strategy, removing Aids and mental health exclusions or increasing the level of benefits it offers. “The organisation still has to work within laws and regulations but it can be a really useful tool, giving them much more control over their benefits strategy,”
adds Perkins. “Some of the larger multinationals are moving away from following the market and becoming more global in the way they look at their benefits. They can personalise the benefits they offer and use them to differentiate themselves as a global company.”