Across all sectors and industries, the developing world has continued to see market growth and significant foreign direct investment (FDI). Despite recent economic stagnation, and in some sectors, decline in the developed world, developing nations offer great opportunities in manufacturing, construction, and various services in the growing field of peace and stability operations. War, conflict and general political and social instability continue to plague these dynamic environments, and in many regions these are on the rise. 1, 2,
Risk for the many companies sending workers abroad and hiring local national staff is rising as well. Transnational companies, especially those in the public sphere, have a responsibility to offer Duty of Care to their employees. This Duty of Care applies not only for emergency and medical evacuation situations but also for sub-acute and even chronic medical conditions for employees traveling and working abroad.
Identifying risk for employees traveling to the developing and least developed world, mitigating risk for the corporation once in-country and managing risk once exposed are basic principles for any management team with personnel abroad. Health risk assessment for any foreign operation working abroad involves medical best practices, due diligence, health economics and cost effective analysis.
This article seeks to better define the risks undertaken by corporations deploying to the developing world, define the risks associated with utilizing both self-insurance and underwritten insurance and examine best practices in mitigating the risks involved with medical evacuations and assistance providers. And finally, we define the responsibilities that corporations must meet and exceed to fulfill Duty of Care towards their employees.
DUTY OF CARE
The concept of Duty of Care in the corporate sector has grown exponentially in recent years. The basic concept in both English and American common law is that the Duty of Care falling within corporate responsibility includes basic health and safety standards and practices for employees. This means that corporations must apply duty of care for employees traveling for work abroad and for basic work in all corners of the globe.
We have seen in recent years that this unclear definition has started to apply even to situations when gross acts of negligence by the employee causes them harm. For businesses working in international settings today, Duty of Care includes medical evacuation and medical treatment for workers when they fall ill and need a standard of care.
Additionally, “the duty of care addresses the attentiveness and prudence of managers in performing their decision-making and supervisory functions.”4 This ‘business judgment rule’ presumes that directors (and officers) carry out their functions in good faith, after sufficient investigation, and for acceptable reasons.
In sum, major companies are increasingly being held responsible for the medical evacuation and other medical treatment costs for their employees working abroad – regardless of the contract and insurance cover prior to the incident. The risk that serious medical injury and emergency increases while traveling and working is severe.5, 6, 7
SAVE MONEY ~ SELF-INSURE?
Most large corporations have found it cost effective to self-insure for the medical calamities that may befall their employees while traveling abroad or otherwise on the job. Self-insurance is a decision to retain risk within the company, as opposed to transferring the risk to a third party. In self-insurance cases, an amount of money is set aside to compensate for the potential future loss (medical evacuation, extreme medical costs or any other associated loss) by the company.
If self-insurance is approached as a serious risk management technique, the money set aside must be enough to cover future and uncertain losses, and actions taken to reduce the probability of the risk occurring, and its impact should it occur.
This amount is calculated using the actuarial and pre-existing insurance information of the company. The underlying goal behind self-insurance is provision of a necessary service to defined levels at the optimum price, and cost containment through the elimination of annual insurance fees.
Purchasing an annual insurance policy (healthcare, medical evacuation or ‘other’ travel medical insurance policy) will cover, subject to Terms and Conditions of the policy, the loss incurred less certain “excesses” which are the amounts that the company will pay on certain types of claims. The real decision is which will cost less, an annual insurance policy or self-insurance?
To minimize the impact of litigation loss from user groups, firms can use a number of risk management approaches, including self-protection, self-insurance, or market insurance. Self-protection involves measures to minimize the occurrence of litigation, including screening clients for high-risk behavior prior to acceptance and continuation.8, 9 The risk that is associated with self-insurance is clear.
Many countries have differing legislation for transnational companies that prefer the self-insure option. In sum, for many companies operating globally, the debate continues to self-insure or not and many decisions fluctuate to fit different markets and dynamic sectors. 10
The case for purchasing an annual insurance policy is not as clear as a financial decision and as a risk mitigation tool. The cost of an annual insurance policy will not only cover the patient’s evacuation and medical treatment but may remove a great portion or even all indemnity and liability from the employer, shifting it to a Third Party Administrator (TPA) or Assistance companies.
The TPA is usually an organization that can process insurance claims and handle certain aspects of any employee benefit plans for a separate entity; this can include medical evacuation and coordination. The cost of international health insurance from the large assistance companies and insurance brokers throughout the world has risen significantly in the past ten years. This rise in cost has forced many companies to review their policies and to opt for self-insurance, sometimes without disclosing such directional changes for the health and safety of their staff.11
The initial cost savings of self-insurance can be quite large, however hidden costs including self-administration (i.e. selecting appropriate care packages, negotiating fixed tariffs, and handling claims), can lead to unforeseen financial losses and legal exposure. One such small mechanism that can help mitigate this loss is purchasing a “stop loss” insurance policy to pay amounts that exceed pre set claim limits.
Stop loss policies are sometimes less expensive than standard health insurance plans and can help to pay for large loss claims. Despite such stop loss policies, Duty of Care may not be fulfilled and exposure not entirely mitigated. This is seen in recent litigation cases. These range from companies not providing appropriate medical or emergency cover for the employees working abroad, companies not reacting promptly to medical emergencies causing injury or loss of life to companies being ill equipped to deal with political and social upheavals. Taking out adequate private Insurance can mitigate all of the above.
Self-insurance often results in a fiscal struggle between a positive balance sheet versus patient care. The endless strive for cost containment reduces patient care, decreases medical standards and eliminates continuity of care.12 All this jeopardizes the corporations’ Duty of Care towards its employees. True mitigation of risk can easily be lost with the company’s first medical evacuation or death of an employee working overseas.
Indeed, while self-insurance can lead to immediate financial gain, the strive for cost saving measures may inversely effect medical treatment standards and ultimately employee satisfaction and tenure.
CONVENTIONAL MEANS ~ LESS THAN CONVENTIONAL HEALTH OUTCOMES
A word of warning for corporations that purchase private Insurance, while the insurance industry is heavily regulated, no regulatory body exercises control over Assistance providers. It is up to an Insurer to conduct its own due diligence when selecting an Assistance company. Unfortunately there are not many assistance experts within the Insurance industry to be able to distinguish the capabilities of one provider versus another.
An Insurer may have their own set of criteria to fulfill when selecting an Assistance provider such as language capabilities, geographical locations, medical expertise, fees or cost containment capabilities and while most Assistance providers can fulfill these requirements there are no formal regulations in place to ensure the provider does not misrepresent its capabilities.
Most Assistance companies claim to be offering a comprehensive one stop-shop solution when in fact most outsource work to a number of external providers. It remains up to the Assistance companies to vet these providers to their internal standards and requirements, if they have any, or and this is often the case, to select them without prior investigation and true due diligence.
While subcontracting is necessary, as no one company has the capabilities to run a case without the assistance of an external provider, be it a taxi company or a ground ambulance provider there is need for greater transparency and control within the Assistance industry. 13
MITIGATION OF RISK
Regulatory compliance with local and international laws of Duty of Care is required for all companies operating abroad. In a recent risk management article printed in the Journal of Peace and stability Operations, Jasbir Dhillon argues that it is critical for organizations to ensure that they have a robust policy for their employees outlining how they may travel safely.14 It is important for any firm working abroad to ensure that their teams are covered on any short or long term work related trips and to ensure that the location and specific travel are covered on the policy.
In 2003, for example, many companies that had purchased insurance before the Iraq War found that their policies did not cover their immediate and emergency workers when first deploying to Iraq. Many companies also lacked standard operating procedures for disasters, including essential contact information and procedural guidelines; some even opted out of drafting a basic travel and work safety policy while operating in war and conflict zones. These negligent actions are not in compliance with the Duty of Care concept, to which companies must adhere.15,16
PROGRESSIVE MEANS ~ UNCONVENTIONAL HEALTH OUTCOMES
There are many Assistance providers to choose from, most claim to be the leading industry specialist, to have the most comprehensive suite of services and to offer the fairest pricing structure. The market is saturated with Assistance providers and while some are more experienced, diverse and known than others none can claim to be industry leaders.
For an Assistance provider to be truly an industry leader, it would need to set precedence and seek to establish a regulatory governing body to ensure that all Assistance companies operate adequate systems and controls to mitigate significant operational, medical, Duty of Care and financial risks.
The Assistance industry is long overdue a transformation to address the shortcomings described above. Likewise the Insurance industry needs to review its selection criteria and on-going audit function of their Assistance Service Providers. In the current economical climate Insurance companies tend to change Assistance providers as a money saving exercise and whilst for some this is a must rather than an option it is crucial to conduct a comprehensive due diligence prior to making a move to avoid legal as well as financial exposure.
CORPORATE SCRUTINY
Despite the many medical programs and travel assistance solutions that corporations have employed for their staff and subcontractors throughout the developing world, many governments such as the United States and the United Kingdom hold ever increasing standards for implementation.17 Adequate insurance must support the health and safety of workers and may provide liability protection when crises such as natural disasters, unanticipated conflict and war and acts of war occur.
This paper does not attempt to address all aspects of corporate compliance and duty of care law across borders. Civil law and occupational health and safety laws require significant due diligence practices by all major companies for expatriate and local workers. After all, the imbalance of power between the legislative requirements of companies and the corporation as an entity is explained by the Draconian consequences of an indictment and the elastic notions of corporate criminal liability.18
CONCLUSION
Opportunities for work in the developing world are growing and are abundant at present with few signs of diminishing. Corporations continue to deploy workers abroad and hire an increasing number of local employees both in peaceful as well as politically unstable parts of the world. The developing world offers great opportunity for transnational corporations and start-up companies alike, but will only be truly successful when approached with calculated risk.
Corporations hold implicit responsibilities towards their employees; Duty of Care is not only the provision of emergency and medical evacuations but also basic medical coverage while traveling and working abroad. Companies must decide whether to self-insure for the provision of medical evacuations and care or to purchase an annual insurance policy to fulfill Duty of Care and mitigate risk. Gone are the days of unaccountable corporate risk exposure.
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13 Actuarial Standard Board, Actuarial Standard of Practice No. 12 , Risk Classification (for all areas of practice) Developed by the Task Force to Revise ASOP No. 12 of the General Committee of the Actuarial Standards Board, Adopted by the Actuarial Standards Board December 2005 Doc. No. 101 (accessed August 12th 2010: http://www.actuarialstandardsboard.org/pdf/asops/asop012_101.pdf)
14 Saltanat Berdikeeva, Journal of International Peace Operations, Volume 6, Number 1 – July – August 2010, page 9 [available at: http://web.peaceops.com/pdf/journal_2010_0708.pdf]
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