We asked leading brokers and consultants to share their forecasts for international employee benefits in 2014, pinpointing the key challenges and concerns of multinational corporations, and explaining how their firms are positioning themselves for the future. These are their replies:
What is your view on the current economic environment and its impact on the global employee benefit industry? Do you see or expect specific trends or changes coming up?
As an industry, we will need to rapidly ramp up at a global scale to meet the demand for integrated solutions in plan design, financing and administration of benefit programmes. The costs will have to remain very affordable for companies with staff fragmented across the globe.
The environment we’ve been operating in for the last few years has featured strong pressure on costs as clients have limited resources; increased competition between providers; and additional regulation and compliance requirements, such asSolvency 2.This is likely to continue for the next two years at least, resulting in consolidation among players, a shorterdistribution chain - as its value drops, higher barriers to entry, increased focus on profitable operations, and more innovation byplayers to differentiate their offering.
Compliance issues are becoming increasingly important to multinational companies. Many are looking for “one stop shop” global service provision, advice and support for compliance, and process and risk management. We see a clear trend towards managing benefits globally.
The economic outlook seems in general more stable than last year, but for 2014 we still expect employers to focus on cost-effectiveness for their benefit programmes and continue to take a more centralised, (or at the very least, regional) approach towards both the financing and design of global benefit plans.
We believe that the difficult economic situation in Europe will continue for some time, and that this will lead to a general restraint on the levels of health care coverage offered by employers.
The HR leaders of today’s multinationals have to deal with two very real and contrasting challenges: first, they have to grow larger and that means getting more global and expanding into new markets; second, they have to manage the costs and risks inherent to global expansion, so as to ensure their corporate brands’ long-term success. This will require significantly more centralized governance of employee benefits to ensure that local programmes are designed and financed in the most efficient way for the global organization
Centralisation has become the key topic among multinational companies. While traditional approaches have been reactive and highly decentralised - with local purchases of insurance, new approaches are based on developed global strategies and governance frameworks. The key focus is changing from concentrating on cash and long-term incentives to wellness, non-financial recognition, financial stability in retirement, and access to affordable health care.
With soaring health care costs, what are some key areas for multinationals to focus on in order to provide employees with adequate health benefits while managing costs?
Employers should help employees to take a more active role in their health by offering them a few plan options, plus initiatives designed to improve health and reduce costs, for example, offering group health benefits to active employees through a private health exchange will be their preferred approach in the next three-to-five years.
The right mix of care and costs can be achieved through proper benefit design and review, cost containment measures at claims management level(R&C costs, medical provider networks, fraud and abuse control, etc.) and finally,through medical services such as prevention and patient management.It is essential for companies to understand the whole picture and not focus only on one aspect of the equation..
Preventive measures like a health promotion policy can help reduce sickness absences and also health costs. Deductibles can be implemented and have the effect of reducing medical costs. Many larger companies also set up frame contracts to give their employees the chance to benefit from special premium conditions.
We see a growing interest in wellness and health management as preventive measures against rising health care costs. A review of medical plan design with regard to eligible members and cost-sharing with employees will continue to be in focus
Multinational companies must put a firm focus on the needs of their staff, ensuring that the health plans provided for their employees continue to meet their requirements in a targeted and efficient manner.
Multinational organisations have to attack rising costs from both supply and demand sides. On the supply side they need to continue leveraging global spending power with vendor partners, via multinational pooling, captive and other global arrangements. On the demand side the key is to get ahead of the curve by understanding your organisation’s unique health risks and drive strategies that address these risks early through health and wellness programmes. The most successful organisations will create a culture that provides employees with both health and financial well-being, which ultimately delivers lower costs and greater productivity.
Global health care is a core focus area for multinational companies, mainly due to rapidly increasing medical inflation, an expanded market, and new and increasingly expensive treatments. Multinationals are reviewing plan designs in order to align employer and employee interests and behaviour. We are also seeing a significant focus on wellness activities as well as absenteeism and presentism management.
What are the key expectations of multinationals for employee benefit providers in the area of retirement benefits? Which aspect(s) are ahead, and which are lagging behind expectations?
Financial Wellness. retirement plans should be part of a broader financial picture for participants, and any goals for retirement plans must align with goals for overall financial well-being.
De-Risking Pension Plans. Defined benefit plan sponsors are looking for ways to minimize volatility of accounting expense and contribution requirements for their pension plans.
De-risking pension liabilities and changing from DB to DC plans are still ongoing topics. Mobile employees are demanding equal coverage worldwide. Top management employees like to have influence on how retirement assets are invested – this is individual depending on the risk attitude, and consulting can be very time-intensive. Tax issues also need to be considered – here we see a demand for more assistance.
It depends on the country and the type of retirement solutions prevalent, but with the transition to DC plans we think that in general there will be a growing demand for communication and investment management tools for members both in the accumulation and decumulation periods. This enables members to make educated investment choices where relevant, and avoids situations where employees cannot afford to retire due to poor investment management. We also see companies taking a close look at how their DC plans are constructed and how they can enhance plan features, investment options and returns. We believe there will be a growing interest in global DC plan management.
Some providers are ahead of the market in terms of Pan-European pension plans, but this has not yet been picked up on a broad basis
Reducing long-term liabilities for DB retirement plans around the world is a primary issue on the minds of our global clients. Both consultants and vendors need to bring ideas and solutions to help reduce and eventually eliminate risks for clients with such long-term strategies. Similarly, global HR leaders are gaining greater oversight of their on-going DC plans so retirement providers must sharpen their DC product offerings and ensure they can align with the multinational client’s governance needs.
The key focus areas within cost management are, in brief: the continuing shift from DB to DC plans, and the ability to predict costs whether DB, DC, or hybrids.
There is also increased focus on addressing costs and the need for adequate benefits, taking into account the overall trend of shifting costs from governments to private systems, as well as increased longevity. Finally, the growing middle class, in Eastern Europe for example, is starting to create new needs and markets for benefits, including retirement benefits.
The growing global workforce is creating further needs for international retirement plans, and in established markets the key focus development areas are in terms of flexibility, communication and transparency.
What roles do you expect brokers and consultants to play in the employee benefit industry in future? What are the major challenges for consultants
To assist our clients outsource the management of their benefits programs. Whether this is from a governance, design, financing, administrative, or communication perspective, we are in the business of global benefits, not our clients. We want to be seen as the pre-eminent one-stop global benefits solution.
In this increasingly competitive environment, we expect brokers and consultant to extend their service offerings to provide broader solutions to their clients. The major challenge is the geographic scope and breadth of skills needed to stay ahead of the game.Another challenge is that some risk carriers are developing their own offeringsfor multinational companies. This is the case for international health with Allianz and AWC, Cigna with the VanBreda International acquisition, and AXA with AXA PPP. GEB is also working mostly directly.
Our role will be to help companies improve corporate governance in respect of employee benefits globally. We will continue monitoring local developments, benchmarking, offering risk management consulting and advice on improving internal processes, helping with cost savings, filtering information, and educating involved employees from HR, risk and finance departments.
The main role for brokers and consultants will always be to act as independent, unbiased advisers to employers. As providers get increasingly better at developing product solutions, and with increasing complexity around legislation, consultants will play an active role in advising on the best solution available for the employer’s specific needs. As large companies come to focus more on global issues, the broker and consultant need to be able to advise on a global basis. It may be a challenge for global consultants to offer consistent service levels and pricing for their largest global clients worldwide.
While the roles of brokers and consultants will broadly remain as they are, we see the major challenges ahead being in the area of services and pricing. In other words: how to provide the right services at the right price in a constantly changing and highly competitive environment.
Whether broker or consultant, our roles are clear – to deliver optimised value for employee benefit programmes in every market we serve. We need to thoroughly understand our clients – their unique corporate strategies, global HR and benefit philosophies, and how they prefer to manage risk for their employment programmes. Armed with this information we can advise our clients on the best approach to delivering retirement and risk benefits in each of their markets, which may mean DC programmes, full or partial insurance arrangements, self-insurance, captive solutions, or cash alternatives in some cases
The key role of global brokers and consultants will be to support multinationals with coordinated purchasing based on active pooling and captive strategies. The key need for multinationals is data to understand their current positions, costs and risks. The first step for us is usually to audit what is in place in each territory, and to make recommendations for change and efficiencies, and then put in place a centralised co-ordination, governance and reporting framework to ensure benefits are closely aligned with local requirements as well as consistent with global strategy - without requiring decision-makers to liaise with multiple advisers and providers across their territories.
Corporations are centralising HR and finance functions and will increasingly be working with global brokers and consultants to conduct administrative functions, manage data, project trends, and follow legislative changes for multinationals in order to be able to drive efficiencies without losing sight of local markets..
Broker and consultant profiles
Practice Director, EMEA Global Benefits.
Based in Amsterdam, she has over 25 years' experience advising major global organizations in the areas of global benefit strategy development, governance, benefit plan design, expatriate solutions, multinational pooling and captive (re-) insurance. Her current focus is on global benefits management and related services. Prior to joining Aon Hewitt in Amsterdam, she worked in the Netherlands and the UK.
Deputy Managing Director, Global Sales
He has been responsible for international sales and development for the last three and a half years. He also oversees the medical department, which is an essential element of the company’s service for its international operations. Since February 2013, he has been responsible for global sales for the group, as well as for the marketing department. He has lived and worked in Europe, Asia Pacific and Latin America.
International Employee Benefits Specialist.
Born in the UK and now a British/Swiss national, he has nearly 30 years of pension consulting experience and has worked for Kessler since 2012. Before that he was with two life insurance companies and an insurance broker. His main functions are pension scheme consulting.
Partner and Head of Market Development with International Consulting in the Nordics, located in Oslo.
He has worked with Mercer or Mercer-related companies since 2000, including two years in Singapore where he was responsible for some of Mercer's largest international clients in Asia. His brief has covered retirement, benefits, and M&A-related work, which he continues to be involved in. He has 15 years of experience with expatriate policies, retirement and benefit plans for multinationals. Prior to Mercer, he was the International Employee Benefit and Pension Manager for a European Global Fortune 500 company, and before that he worked in the life insurance industry.
Among his key responsibilities are developing,managing and servicing global accounts, drawing on his particular expertise in international health insurance. Heholds an MBA in Insurance Company Management from the EcoleNationaled’Assurance, Paris.
Senior international consultant with Towers Watson.
Now a senior adviser to multinational organisations on benefit and reward programmes, he spent several years as a benefits leader at a leading global company. He is pleased to once again be part of the largest, most experienced team of dedicated international consultants in our industry.
Head of International and a vice president and senior international consultant.
With Willis since 2001, he is based in Copenhagen and London, and responsible for providing services to multinationals for their worldwide employee benefits needs. He has extensive knowledge of cross-border solutions and multinational pooling, which he developed during 20 years in senior roles for two of the leading multinational consulting firms.
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