Get with the Program: Keys to Success in Global Insurance Programs

(GRM002)

Speakers:

• Dan Brudos – Manager, Risk Analysis, Deere & Company

• Claire McDonald – Global Practice Leader, International Insurance Solutions, Allianz

• Peter Austen – NA Marine Practice Leader, Willis Towers Watson

Learning Objectives

At the end of this session, you will be able to:

• Describe Fundamentals of a Tailor Made Global Program

• Anticipate Tax, Compliance, Regulatory, premium allocation

and admitted/non-admitted obligations

• Look for indications of an outgrown local program that should

be a centralized global program

John Deere

John Deere’s Footprint

Risk Management Philosophy

• Broad all-risks coverages

• Best terms and conditions

• Effective cost management

• Central control but integrated locally

• Admitted carriers

• Coordinated with other coverages

• Loss prevention and mitigation

• Global partners that match our exceptions

• Integrity

• Compliance

• Long-term view

• Team approach

Risk Management Challenges

• Supporting global growth while maintaining operating margins

• Operating in countries we are not familiar with

• Regulatory environment

• Lack of established business partners

• Often utilizing third-party providers

• Operating in countries with higher than average loss

experience

• Infrastructure

• Business practices

• Economic environment

Risk Management Solutions

• Stable partners that are recognized in the particular insurance

market and have demonstrated a long-term view

• Global capabilities with a single point of access

• Underwriting

• Claims administration

• Loss control

• A dedicated account team

Global Cargo Insurance Team

John Deere

Risk Management

When to Recommend a Global Program• Cargo Programs are Global by Nature

• Goods move between countries

• Non-admitted may be allowed

• Terms of Sale (Incoterms)

• Define responsibility for insurance between buyer and seller

• Few countries mandate import terms

• Modified for intercompany sales to reduce local policies

• A single local policy can benefit from review

• Don’t need to be a huge multinational

Understanding Client Needs

• Where is Client Located

• Type of Operation

• Manufacturing vs Distribution

• Define Local Exposures

• Import/export

• Inland Transit

• Stock/Inventory

• What Local Regulations Apply?

• AXCO

• Lloyd’s Registry

• Services Required

• Local claim payments needed?

• Current relationships

• Claims Experience

Market Matching Issues

• Industry Preference

• Owned vs Affiliated Network

• Assistance with Effective Premium Allocation

• Transparency with Local Taxes, Policy Fees

• Local policy wording/Local Market Standard Cover

• Certificates

• Global Master Premium payments

Overall Program Goals

Communication

What makes a successful program?• You have to work as a team, no one part is successful without

the other two … You need

• A common understanding of key priorities and objectives

• A clear assignment of roles and responsibilities

• Local engagement supported by central decision making

• Establish written principles/agreements (Service Charter)

• To know what is going to happen…. And when

• Ensure that all parties are receiving regular progress

updates and reporting

• Encourage regular feedback and dialogues to ensure

everyone is and stays on the same page

The added value of your insurer

• Understanding of the local market and their policy forms –

helping you to achieve the right policy coverage

• Minimize DIC/DIL exposures

• Sharing our own lessons learned, business experience gained

from writing business in that country

• Accompanying you with the right risk management advice and

if possible accompanying that with on site risk engineering

What does being part of the team mean for the insurer?• Gain a greater understanding of the client and not just their

current but also future intentions and roadmap …

• We have an alignment of interest – we don’t want our clients

to have losses and neither do they

• Agree on risk management priorities

• This is not a short term relationship, but more a long term

partnership

• A more personal and less transactional relationship

• A wider understanding of the full risk portfolio of the client

Recap on Learning Objectives

• Describe Fundamentals of a Tailor Made Global Program

• Anticipate Tax, Compliance, Regulatory, premium allocation

and admitted/non-admitted obligations

• Look for indications of an outgrown local program that should

be a centralized global program

Q&A

Global Cargo Team Successes• Collaboration with worldwide Logistics Partners Council

• US to Mexico Heavy move

• Brazil Six Sigma project

• South Africa Local Policy

• Mexico Focus Group

• Relationship

• Audit Process

• Quarterly reporting

• Follow-up

• India – visit with forwarder, carriers, packer, etc.

Heavy Move US to Mexico

Brazil Six Sigma Project

• Quality Delivery

• 94.3% delivery without damage

• Insurance Spend

• Over 70% loss ratio

• (excluding unusual)

• Claims Indemnification

• 34 days

(from complete documentation)

Before After

• Quality Delivery

• 99.2% delivery without damage

• Insurance Spend

• Under 20% loss ratio

• (excluding unusual)

• Claims Indemnification

• 5 days

(from complete documentation)

Brazil Six Sigma Project

Check Check Check

South Africa Policy

• Step 1 – Review local policy

• Origin – Port of Import

• Destination – Buyers across Sub-Saharan Africa Countries

• Basic institute “all-risks” coverage

• Step 2 – Review admitted regulations in all affected countries

• No countries had admitted requirements

• Step 3 – Review claims experience

• Few claims relative to volume shipped

• Negligible impact to Global Program

• Step 4 – Master program agreed to accept exposure

• No additional premium required

• Step 5 – Cancel or non-renew local policy

Mexico Focus Group

• High incidence of theft and hi-jackings

• $100,000’s losses per year

• Local meetings arranged

• Risk Management

• Underwriter/Broker corporate loss control

• Local stakeholders – Deere and transporters

• Mexico Focus Group Formed

• Agreed Loss Control activities with carriers

• Created Standards for Driver Hirings

• Created Audit process and Truck Checklists

• Established Formal Quarterly Reviews

• Significant reduction in losses

Root Cause Analysis in India

• Situation – Losses occurring in India on journey from Mumbai

to Pune – Freight forwarder involved, drivers dying …

• Decision taken for a joint team including risk engineer to follow a consignment

and experience the road conditions for themselves

• What they found out – Was not what was planned – so a key learning – don’t

assume!

• Drivers were taking a longer break to sleep (instead of dedicating themselves

to this one job) and then rushing to get to the destination instead of the more

measured pace expected

• Outcome – Driver behavior addressed and a reduction in loss in life

Conclusion

Communication is the key