During the Swiss Life Network Client Day 2014, we invited four major international intermediaries to choose topics for discussion with an audience of participants from multinational companies and Swiss Life Network Partners. To get a clearer picture of everyone’s opinions, we also invited those present to vote on various questions. Here are some of the highlights of the session.

Flexibility - but not for free

The retirement age is continuously being pushed higher by legislation. People are working longer not only because of the law, but also because they realize that they must save up more for retirement, particularly to cover their future lifestyle and healthcare needs. Over 60% of participants at the session believed they would have to live on their occupational pension and their own savings, and that they would not receive enough from the state.

Another topic of great concern was healthcare in old age. Around 80% of participants believed that private healthcare would be necessary to cover timely access to medical facilities, as well as long-term care.

In light of this, it was unsurprising to see “flexibility” chosen as one of the top elements for employee benefit plans. Some 66% of participants suggested that when it came to employer attractiveness, “a very flexible employee benefit plan” and “flexible working hours, on-site fitness centres, and childcare services” had the greatest importance. Less than 4% chose career opportunities.

Mark Cook of Towers Watson commented on the popularity of flexibility: “There will be more flexibility in all areas of benefit provision, whether pre- or post- retirement. I think we’ll see full flexibility in life, medical and pension coverages, both global and local.“

Flexibility was also a feature when it came to employee wellbeing. Of those present, 53% considered “flexible work options, such as work hours, job-sharing, etc.” as the best way to support employees’ work/life balance and thus wellbeing.  

When asked about the costs associated with flexibility, Mark Cook commented: “There will be more employee cost-sharing, that’s for sure. With new generations joining the workforce, the cost-sharing concept, in other words, paying to get exactly what they need, is more desirable than a rigid ‘one-size-fits-all’ plan.“ Alan Hewitt of Willis Global Solutions agreed: “Companies will most likely play a facilitator role in providing additional benefits and wellbeing programmes, and employees will need to decide what they want to get and pay for. Flexibility comes with a price tag.”

More international mobility, but less traditional expatriation

Global mobility was also a hot topic. Compared with five to ten years ago, when expats were often sent from Europe or the US to other parts of the world, the current landscape of global mobility is far more diverse. In response to the question: “No expats anymore, only local employees?” 60% of participants believed that the number of employees on international assignments would increase in future.

However, when asked what type of international assignments will gain in importance, the top two choices were:

  • Global employees not tied to any particular home country, and
  • Localisation, i.e. the integration of expatriated employees into the compensation and benefit system of the host country in a “local plus” plan.

These were followed by regional assignments, and short-term expatriation, typically for up to a year. The traditional four-to-five-year assignment for senior top managers with a family is already less prevalent today.

These new types of assignment are less expensive. At the same time, their gain in popularity is also due to a change in the reasons for international assignments. According to participants at the event, the top reason for sending qualified people on international assignment today is no longer mainly to develop business in emerging markets, but to transfer knowledge and technical skills to local employees.

According to Simon Ball of Aon Hewitt: “Mobility will continue to be a hot topic as companies cannot be successful if they limit themselves locally, or even regionally. Expats are still highly valued employees, but they are certainly not rewarded as heavily as five to ten years ago. There will be a lot more international mobility, however with less expatriation, and different styles of mobility, as companies work out the best ways to match their strategies, operations and management needs.”

Risk pooling will evolve rather than die

Multinational risk pooling, also known as international experience rating, is a technique developed more than 50 years ago to help multinationals optimise the costs of risk coverages outside their home countries. One of the initial benefits to multinationals was the potential international dividend they could receive. Nowadays, with higher cost pressures, tougher price competition, and insurance margins continuing to shrink, the question arises: will risk pooling come to an end soon?

On this point, 63% of all participants gave a firm “no”. Interestingly, over 80% of the multinationals thought not, while on the provider side, it was a more even split (about half the insurers present thought that risk pooling would come to an end). This is probably because multinationals are still enjoying the benefits of international dividends, while providers are more directly confronted by the associated costs.

When it came to the main advantages of pooling alongside the potential international dividend, 43% of participants chose the coordination support by a global network to solve their worldwide employee benefit issues. Second most valued was reporting on costs and claims experience. However, over 20% of respondents thought that the only advantage was financial.

How will pooling evolve, if it is not coming to an end? Opinion varied greatly on this question. Around 20% of participants thought it would be replaced by instant reporting on costs and claims, 12% thought it would be replaced by captive solutions, 14% thought there would be risk pooling at the regional level, while 40% of participants thought it would stay as it is today. “One cannot draw a simple conclusion on how pooling will evolve,” said Jimmy Johansen of Mercer International Consulting Group. “The world of global employee benefits is extremely diverse. There cannot be one solution that fits all. The future evolution of pooling will reflect this too.”

Although the participants’ opinions cannot be statistically representative, we did achieve a snapshot of where they think global employee benefits are heading. In short: every element of employee benefits is evolving in response to the deepening of globalisation and to ongoing demographic and economic changes. It is critical for solution providers to continue to closely monitor the trends and changing needs of multinationals, and to proactively act on these.