François Beaume, VP of Risks and Insurance at Sonepar, says that using captives for employee benefits is a missed rendez-vous that the organisation is tackling head on
Captive solutions are becoming more and more popular, with between five and six thousand in use worldwide.
Despite this, just 150-200 of those captives are being used to cover the life insurance elements of employee benefits.
This seems like a missed opportunity, particularly when you consider that the budget for insurable employee benefits is twice or three times that of property and casualty budgets.
This may be because there are several challenges when using captives for employee benefits. These include:
- Insufficient data
- Confidentiality of employee medical data
- Mandatory local requirements
- Sensitive coverages involving unions and families.
- The decentralized and fragmented landscape
- Technical jargon
- Siloes between functions
- Education gap
One company that is facing these challenges head-on is Sonepar – a $32bn electronics distributor.
François Beaume VP of Risks and Insurance, spoke at the Risk-!n conference about how the organisation is making strides to include employee benefits within its 20-year-old captive solution.
One key obstacle Sonepar had to overcome was a lack of communication between the HR and risk functions. Despite dealing with the same strategic exposures, they were speaking a totally different language and did not share the same perception of risk.
However, Baume says that this relationship is starting to be good, following a change at the head office that allowed the company to break the silo and define a common strategy. This was a long process, taking for four or five years and he had to focus on being in a benefits and compensation mindset.
He said: “We were able to express what a captive is, and the value proposition with regards to employee benefits. We showed them that what we’ve achieved with non-life, can also be implemented with employee benefits and it will be a joint venture.”
To get buy-in from HR, risk has had to take on the “least sexy” part of the problem, namely interacting with local people to set up KPIs.
Baume explained: “Our HR people were trying to escape from that, so we are the ones taking that on, which is making the whole project viable.”
There are several core advantages to including employee benefits in captives, such as:
- Increased transparency of data collected by insurers
- Reduction of potential gaps and duplicates
- Greater control of processes, costs and coverages
- Flexible approach with coverages and claims
- Regular reporting
- Investment in targeted loss prevention initiatives
Baume says: “We were able to onboard the cyber security team in a similar process, which means that the value was proven, visible and tangible. Then when we speak to employee benefits, they trust us because they see it’s been successful elsewhere.
“We’ve got plans to map employee benefits worldwide that are usually managed locally… It’s a game changer for us, not just for me as risk manager… Essentially the captive is a research and development financer for new risk management developments. The ROI will be massive.”
Beaume shared the stage with Pascal Prévost, the former manager of corporate insured employee benefits at Nestlé.
Prevost explored some of the strategic and tactical approaches that risk managers can take when using a captive to insure employee benefits.
You can read some of his top learnings here.
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