Egypt. Jordan. Bahrain. Recent headlines tell the tales of political unrest and hazardous situations around the world. For multinational companies, insuring employees against the risks of doing global business should not be overlooked. As multinational corporations expand into markets outside the US-markets that may have been recently added to the US State Department's travel warning list-and as more and more countries strain under the tensions of wartime, economic uncertainties and government upheaval, the amount of human resources in adverse or volatile locations has also increased. Human resources directors for multinational companies must now prepare a responsible benefits package to protect its personnel against a unique set of risks.
War and Terrorism (W&T) The W&T exclusion you'll find in most global benefit plans is usually reserved for employees or contractors traveling or conducting business in a traditionally hostile zone. Iraq, Afghanistan, Yemen, Sudan and many other OFAC countries for which either the Department of Treasury or the US State Department have issued a travel warning come to mind. Recently, however, historically passive countries like Spain, India and Ireland have seen a rise in acts of terrorism.
In fact, the list of countries or regions falling victim to terrorism and the sheer number of terrorist attacks is growing at an alarming rate. In 2008 alone, a US State Department report documented 11,770 terrorist attacks worldwide with 54,747 people killed, injured or kidnapped. Sadly, as US and international corporations expand into new global markets, the number of these incidents appears to increase.
Because terrorism can no longer be considered a problem in a few geographic locations-it is becoming a worldwide risk factor-the need for human resources and benefits managers to adequately protect against possible losses due to terrorism has become a critical matter. Some insurance carriers have tried to mitigate this risk with a W&T rider to the entire company's group policy.
For most companies who have a relatively small percentage of their personnel traveling abroad, a rider of this scope is too expansive and costly. Furthermore, these types of riders still impose aggregate limitations as well country restrictions. The smarter choice for companies doing international business is a carve-out of only those employees doing business abroad. This allows for sufficient coverage without incurring the higher premium involved with covering the entire company-the majority of which are not exposed to the risk.
W&T Carve-Out for Key Personnel The employee or contractor exposed to the W&T risk is often times a highly compensated executive, principal or owner. Protection for these key personnel is usually addressed in the well-written benefits plan, but their coverage may come up short because of policy maximums or W&T exclusion. Many life insurance policies, including Key Man policies, are progressively rated based on past, current and future travel destinations. It is usually more cost beneficial to carve-out and issue a W&T policy for these key staff members on a per trip or assignment basis.
Will Defense Base Act (DBA) insurance sufficiently alleviate the W&T risk? Simply put: no. This legislated insurance requires companies to extend coverage to acts of war and terrorism and provide injury and death benefits up to 200 percent of the national average weekly wage or 200 percent of the employee's full average weekly wage, whichever is smaller. The problem with DBA insurance, and why it won't work to protect your key personnel, is that the injury and death benefits are far too low. At just two times the insured's weekly salary, DBA insurance leaves your key personnel dangerously underinsured. Financial advisers recommend a policy, or policies, whose benefits pay seven to ten times the insured's annual salary. Since most employees don't carry an individual policy to provide this level of benefit, relying on DBA insurance alone will not properly protect your employees for loss of life or injury.
International Disability In 2007, the Social Security Administration reported that 70 percent of the private sector workforce had no long-term disability insurance. Further compounding the problems for under- or uninsured personnel, in the event of a W&T-caused injury there is limited coverage-usually a lump sum payout-for long-term disability. So workers affected by a disabling injury, even with DBA coverage, will most likely fall short if the disability is long-term. With highly compensated executive or key staff members at risk the problem increases significantly, but a carve-out solution to protect these key personnel in the case of W&T-caused injury proves again to be quite beneficial.
Kidnap and Ransom (K&R) Lastly, K&R policies are among the least understood policies for human resources and benefits managers. Since K&R incidents are often kept private as a safety precaution, the insurance industry has limited data about the actual risk of these occurrences. The likelihood of incident may very well be low, but a K&R scenario could prove tremendously expensive should it happen. While some countries pose more of a risk than others, for many traveling executives this is a real threat wherever they may go. These policies are designed to reimburse the policy owner for all expenses incurred with a kidnap for extortion.
Specialized Solutions for International Workers As we've just outlined, employees working abroad carry a unique set of risks that are sometimes underestimated and rarely anticipated. DBA insurance is not an adequate solution-especially for key personnel or those at risk for long-term disability-W&T riders applied to an entire group plan are unnecessarily costly, and with terrorist activity on the rise the need for specialized policies like K&R is becoming an alarming reality.
As more and more companies send their workers into the global market, human resources and benefits managers will need to procure a variety of specialty insurance plans. Enlisting the help of insurance providers specializing in W&T, international disability and K&R insurance will ensure the right coverage for their specific needs. Furthermore, creating carve-out policies for key personnel and staff working overseas will keep premiums low for the company as a whole, while providing the protection international workers deserve.
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