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Improve the financial performance of insurance contracts : the pooling
Known and practiced by large international companies, the international pooling is a privileged system that enables companies to maximize returns on their insurance schemes (health insurance, provident scheme, pension plan).
The gains may be very significant. That is why, in recent years, this practice extends to intermediate size companies, even middle (from 300 to 500 employees), as soon as they are located in at least two different countries.
The principle is simple : to entrust all or part of insurance schemes made in the same Group by different subsidiaries to one insurance company or to one international network of insurance companies. This type of structure offers the possibility to consolidate the results, and give the Group a dividend accordingly, by reimbursing a portion of premiums when the rate of claims on all insurance contracts is favorable.
The stakes of an international pooling are many. It is a key leverage when it comes to maximizing the return on insurance schemes in each of the subsidiaries of the same Group.
Several reasons :
- The effect of size which makes it possible to weight in negotiations with insurance companies.
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The ability to negotiate freely or not insurance contracts according local regulations : in some countries, contracts for medical and pension costs are negotiated freely (in France for example); the fees can be adjusted for benefits paid, through a reduction in contributions or a profit sharing linked to results. In many other countries, the contribution levels are fixed, and therefore cannot be reduced whatever the result of the contract is.
In an international pooling, positive results for these countries are included in the consolidation and in the payment of the corresponding dividend. - Insurance fees : it is possible to negotiate favorable insurance fees from insurance companies in benefiting from economies of scale, through the participation of all the resources of the Group, and to cancel some unnecessary commissions paid to intermediaries.
This project is also an opportunity :
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To identify the subsidiaries of a Group where the perspectives for gain are the most promising, and whose report contributions / benefits is not optimized, and thus liable to a local negotiation before their entry into the international pool.
In general, all subsidiaries have an interest in this approach : the largest subsidiaries that are reluctant to devote the necessary energy, because this work is not really recognized and sometimes tedious. The smallest subsidiaries, because they do not have the critical mass, or the time required, or the expertise in-house, and that they will benefit from their good results if the mother company agrees to surrender a part of the worldwide profits. -
To review the levels of coverage offered to employees of the various subsidiaries.
The objective of an international pooling is not to unify the benefits at a Group level or to modify existing contracts in the various countries. Once again, the international pooling is only an excellent way to reduce costs without reducing benefits for employees; the condition imposed on the new company insurance is that it guarantees the resumption of commitments in conditions at least equivalent to existing conditions. In other words, the establishment of an international pooling can be done without any modification of contracts of the various subsidiaries.
If a subsidiary is able to obtain better terms than those offered by the new company assurance, it may be useful to reconsider its integration within the pool.
However practice shows that the executives seize this opportunity to modify some of their contracts, e.g. in improving some benefits that they deem insufficient, or in bringing consistency into several subsidiaries operating in a same country.
We can help you :
- To develop specifications, and an agenda for the implementation of the project,
- To select the insurance company or an international network of insurance companies from a competitive tender,
- To collect and analyze information,
- To negotiate and implement an international pooling contract,
- To renegotiate contracts in the subsidiaries,
- To terminate and transfer the contracts country by country to the new insurance company,
- To prepare the information of the executives and managers, employees and their representatives.