We now look at the way businesses arrive at a tipping point where they want to talk with the broker – someone they trust – to help them take the next step to obtaining a multinational solution offering central control and leverage.
The idea of a ‘tipping points’ where medium-sized businesses with assets overseas are prepared to listen to the case for switching away from having a local insurance solution to having a more central multinational program that helps them save management time, was a powerful research finding.
This tells us that if brokers keep a "watching brief" on target businesses – staying in touch with their needs as they expand internationally – they will be well placed to identify the optimum time to develop a dialogue about the way in which multinational programs meet their customer’s local needs, while also offering certain leverage and economy of scale advantages. It is the broker that medium-sized businesses trust the most and that there is a willingness to listen to brokers. Indeed many businesses were surprised that brokers were not more proactive in outlining different international risk management options for their scale of business.
Multinational insurance solutions gradually start to be considered as businesses grow.
Most of those spoken to were very resourceful in getting local-based insurance cover via local, trusted contacts.
This initially lowered their anxiety about complying with all of the local regulations. But the businesses then could see a point where they might begin to worry about whether they could continue juggling lots of local insurance solutions. At this point, when a multinational solution is explained, businesses intuitively begin to see the merits of this approach.
Richard, a financial specialist, at a thriving telecommunications business, explained his current focus on understanding the local situation, but likely later global thinking: "We are obsessed with getting the local compliance right - the structures and that kind of thing. We are 100% relying on what local people tell us."
But he pointed out that he could see the logic of the centralized multinational approach, adding that: "‘I can see that as we get to a certain size - maybe 10 countries – then operating locally could be too much of a burden. I could see us moving out to this centralized model."
There seem to be two voices going on in the heads of people running businesses that are beginning to expand internationally. One voice is saying that, as a fast moving entrepreneurial business, they need a quick, local fix that is uncomplicated and avoids layers of perceived bureaucracy. But the other voice, is saying that if the business is to go to the next level, then they need to learn to delegate and apply leverage, which deep down they know is the key to the success of larger business operations.
There is a tipping point when a business is ready to discuss multinational insurance options that reduce management time and save them handling lots of different local insurance scenarios.
Our research showed that there is often a specific tipping point where it becomes clear to a business that it needs to move on from locally arranged insurance provisions to a multinational solution if it is to grow. So for many it was a case of keeping a "watching brief" on the point at which they could be ready for a multinational solution. A typical comment was: "Certainly, if we get to the point next year, where we have even more of an international presence, then a more centralized approach would be useful – so keep me posted."
The identification of the tipping point concept was a key insight because it tells us that if the moment is chosen correctly, businesses will be receptive to a compelling argument presented by a broker who can touch a nerve with businesses by reminding them that to grow there is a point where they need to think like a bigger business, which includes having leverage and more central "command and control" than they may have been used to in the past.
Brokers are the key to introducing - at the tipping point - the multinational concept to businesses
The businesses spoken to were often surprised by the fact that their broker was not more proactive in outlining the options now open to medium-sized businesses expanding internationally. This was all the more surprising when we consider that brokers were much more "loved" than insurance companies. Many of those we spoke to highlighted the long-standing, sometimes personal, relationship they had enjoyed with their broker.
Bob, financial controller at a communications business, pointed out that his relationship with his broker was stronger than with his insurance company, seeing the broker relationship as being "all about trust." He explained:"‘I like to stay with the existing broker… I have a very good relationship with them. . . I know that if I am talking to my broker, it is as good as talking to my insurance company directly."
The executives spoken to highlighted the fact that they wanted to work with a partner who would outline in an even-handed and transparent way the advantages and disadvantages of a multinational program. A successful consumer/broker relationship pivoted around trust, integrity, honesty, and authenticity. Brokers who could clearly map out the pros and cons of multinational solutions would seem to be in high demand.
Importantly, the research was telling us that these businesses would welcome – when the time was right – proactivity from brokers in taking the multinational case to medium-sized businesses with assets overseas.
Insurance companies need to be reputable and global
As explained, brokers are key to the relationship with medium sized businesses. Insurance companies stood in the background, being seen in a "neutral" way.
For the majority, an insurance company would tick all their boxes provided it was a credible international insurer with a solid reputation, operating on a global scale.
"When it comes to the insurance company, it is not something I have been worried about in the past, to be perfectly honest… They are usually backed by other people… So it was not a huge factor … provided they are a very big company, well established, with a big brand name…Then I’m safe taking them on board."
With brokers in pole position, insurance companies are evaluated in terms of their solidarity, scale, and overall trustworthiness – plus being able to deliver multinational solutions in a flexible way.
There are three tell-tale signs in spotting the tipping point where local solutions give way to wanting to hear more about multinational options.
Opportunity cost:There is a point where businesses begin to sense that insurance is now an issue that should be delegated and managed through a multinational program, so they can focus on other business activities.
A perceived slide in professionalism and effectiveness: There is a realization that as managers they are no longer giving each local situation sufficient attention and things are beginning to slip.
Too much dependency on the local contacts: A feeling begins to surface that the business has become too dependent on the insurance that has been arranged at a local level. They begin to feel the need for more control over key issues.
The skill would appear to be for brokers who we have seen are the trusted "go to" partner in this journey toward a multinational solution to set up a conversation that puts on the agenda issues such as the optimum use of their management time, a possible over dependency on local contacts, and concerns about staying on top of the local insurance model.
What brokers told us about midsized businesses with assets overseas
As part of the research, we had discussions with brokers who did business with medium-size businesses with assets overseas. We explored their views on the idea of AIG being more proactive in providing medium-sized businesses with multinational programs that these businesses may previously have thought were only available to large multinationals.
This confirmed that brokers could see the wisdom of targeting on this market sector. As one broker said: "It is of interest to us to find that someone else has looked into what makes these organizations tick, what makes them want to expand, and how they go about expansion – that’s the interesting part to us because we can tap into that. We know at what point we can get involved and how we get involved. Unless you know how this works, you don’t know how you are going to interact with it. So for us there is lots of interest."
One particular issue where feedback from brokers has helped in this focus on midsize business centered on their need to have clarity around the scale of businesses that would benefit from a multinational program. Some pointed out the varying definitions that exist about what constitutes a midsize business and a need for clarity in the targeting of the marketing efforts. "We do target SMEs but they have to be of a certain size to appear on our radar screen ... you could categorize them by turnover or by staff ... we don’t have a specific definition, but we are probably looking at a business turning over five million."
Proactivity from brokers will pay dividends
The trust brokers enjoy with businesses opens the door to the dialogue about multinational solutions. Being proactive and mapped out in an impartial way, a multinational program that saves time and offers greater efficiencies will pay dividends. Clients are looking for brokers who will show some passion in helping them expand the business.
It is all about building authentic, genuine, and trustworthy relationships. Businesses are looking for the broker to take some of the complexity out of expanding on a multi-country basis by explaining in plain English how multinational insurance solutions will work to their advantage. They are looking for a totally transparent summary of the pros and cons of different approaches.
Top tips for brokers in engaging with midsized businesses with assets overseas.
Medium-sized businesses pride themselves on an entrepreneurial style that centers on not getting tied up with unnecessary bureaucracy, but instead finding creative, "lean" solutions – hence the first reflex of going to a local contact. However, as we have seen, these aspirational businesses start thinking and behaving like a bigger business.
This naturally leads them towards being receptive to the idea of a multinational program. But the transitioning of these businesses to a sensible multinational solution needs to be accompanied by constant reinforcement of the bespoke and flexible nature of the offer. They do not want to feel that they are being forced to accept a "one size fits all solution."
Businesses tend to discuss insurance around earlier "pain points" and will tell stories of things that never worked out because of a failure to understand the details. So being able to tease out the ‘pain points’ for a particular business, and provide reassuring accounts of how these will not occur under a multinational program, is critical.
In short, outlining the high-level benefits of the multinational program need to be underpinned by close attention to detail in explaining the operational mechanics of how this will work for each business. There is a massive appetite for concise, punchy, and impactful updates that remind the business - for countries that are on its radar - about the latest changes in compliance and other regulations. For busy entrepreneurs it is reassuring to know they have at their fingertips the latest situation. This provides great marketing opportunities for brokers working with their insurer.
Each business has its own unique tipping point which can be a combination of several different factors. Don’t be put off by a first reflex to stay local, a broker’s role is to help clients assess this. It is essential that the decision to move to a multinational program is an informed decision and very likely it will require the support of the company board. The broker is a key enabler to this process.
Clients should be examining all opportunities and methodologies of risk mitigation even if not ultimately adopted.
The tipping point comes not only as insurance purchasers gain a better understanding of the benefits of a multinational program but also as they become aware of the potential pitfalls. Availability of certain covers will depend on the local market, and perils that U.K. buyers might automatically assume are incorporated into a good local standard wording may not be. Australian flood is a good example of this - for coverage to be in force the peril must specifically be requested by the buyer; or market practice might simply be not to purchase earthquake or tsunami protection as these perils are sometimes separate from a standard property policy, e.g., in Indonesia. Market practice also applies in respect to limits purchased. Very often, a foreign local entity may not be purchasing sufficient limits to satisfy the central risk manager’s appetite. Unfortunately, these things often only come to light in the event of a claim.
Partnership, preparation, and communication are the key ingredients for success, and this ethos needs to continue post-inception and from renewal to renewal if the full benefits are to be realized. The central insurance purchaser’s control span plays a major role in this, as well as the ability of the broker and insurer to provide support both centrally and locally. A local broker presence is not always necessary (and where one is either through preference or regulation, this will not prevent the process moving forward); however, a credible local insurance provider who is willing to invest in a local relationship plays a pivotal role. s
A broker is in a unique position to explore the potential suitability of a multinational program with its client and to address potentially sensitive topics such as its pain points, worldwide insurance premium spend, and criticality of a business unit to the company’s overall balance sheet. Also, the ability to give the central purchaser the confidence to ask some critical, probing questions internally, for example, about the extent of coverage purchased locally.
Finally, don’t be put off if you don’t have an extended global network. Insurers can work with and without local brokers, and this is often down to client preference. Worldwide networks exist, and an established multinational provider should readily provide you with local contacts, should this be necessary.