Advisen conference tackles rise in global casualty claims, ACA costs

Compliance and tax issues associated with casualty claims in foreign countries and potential financial and legal risks companies face due to enactment of the Affordable Care Act (ACA) were among the issues discussed at Advisen’s Casualty Insights Conference held in New York on March 27.

Barbara Russo, executive vice president and head of international programs for Zurich Insurance Group, warned the conference's 450 attendees that regulatory scrutiny of multinational companies’ insurance related programs will increase in 2014. One area regulators are focusing on is whether multinational companies are paying the proper premium taxes when workers comp and other claims are filed in foreign countries. ‘We’ve seen in European countries especially a search for revenue – there’s a recognition that there is a lot of revenue that could be available from uncollected premium taxes,’ she said during a session on casualty insurance for multinational organizations.

Russo also noted that countries such as Brazil are ‘looking to protect and build a local insurance marketplace, so they’ve passed a series of regulations and they’re enforcing them with a bit of a heavy hand to make sure that their regulations are being respected.’

In light of this, multinational companies will have to make a better effort to understand how the new regulations will affect the different lines of insurance they hold in different jurisdictions, according to Suresh Krishnan, ACE Group’s executive vice president and global accounts leader for Latin America and Asia Pacific. ‘As corporate governance becomes more important, people start asking questions -- where am I insured? How am I insured? How is this going to work?’

Companies must become more aware of the myriad regulations that differ in each of the countries where they operate and the litigation risks they entail, said Michael Dellova, executive vice president and international practice leader at Willis Group Holdings. He noted that the number of accident claims and the cost of those claims have risen in recent years, so companies may want to consider which country they want to fight a claim in if litigation is involved.

‘Even though you may have accidents overseas, some plaintiffs’ attorneys are very savvy to bring those lawsuits back to the United States which creates a completely different paradigm,’ Dellova said. ‘That’s why multinational master policies should make sure that each jurisdiction [a company operates in], including the United States, is covered.’

Another point the panel made is that companies will need to strategize in advance about how to handle all international insurance claims, especially those that may involve litigation. ‘Even small claims can become very expensive if you have to mount a defense in a foreign country,’ said Michael Rodgers, senior vice president of Marsh, who also stressed the need to have an insurance partner with staff on the ground who are familiar with the local court system and other legal requirements.

Panelists explained that not all countries require local policies be purchased in order to comply with regulations, but companies will have to make choices regarding which countries it would be most beneficial to hold local policies in and which kinds of coverage would be most advantageous. They suggested determining which countries have higher rates of lawsuits for certain cases and then purchasing the proper coverage to protect the company interests accordingly. The US, UK, Germany and Denmark are the global leaders in casualty litigation cases. 

A panel focused on the Affordable Car Act’s impact on casualty exposures and claims debated the potential effects the law would have on workers’ compensation claims and corporate healthcare costs. Panelists included Brian Winters, executive vice president of Zurich’s casualty practice in North America; Vinny Armentano, Travelers’ senior vice president of business insurance claims; Pam Ferrandino, national casualty practice leader at Willis North America; Paul Heaton, senior economist for the RAND Corporation and Derek Jones, a principal at consulting actuary Milliman.

While the general view was that it’s too early to tell whether the ACA has lowered or increased health costs for companies, panelists outlined some areas of concern that companies should monitor as more people sign up for coverage. Among the issues highlighted during the debate:

• Will more people being insured lead to longer wait times for treatment, which could deny workers timely care and then result in liability lawsuits if dangerous health conditions were not caught earlier?
• Will more workers having access to care make the overall workforce more healthy and therefore lead to a shift of claims from workers comp to health insurance simply because of the reduced likelihood of healthier workers getting injured on the job?
• Will older workers staying in the workforce longer lead to more workers compensation claims simply because older workers are more likely to get sprains or other injuries?
• Will companies in the 25 states that have decided to implement healthcare exchanges see lower healthcare costs than companies in other states because more people are covered and premiums are lower?

While many of the issues surrounding the ACA have yet to be settled, each company must examine its current costs and put in place a strategy that will help it lower insurance costs over the next five years. The costs for each company are different and the health insurance risks for each industry vary, forcing each company to make tough choices to get ahead of potential increases in health care premiums and workers compensation claims.