GBV’s History of Pooling: International Group Program – IGP
by Peter de Vries
1967: IGP was founded with Ford as its first Client
In the 1960s, Ford began to expand globally, and Ford of Europe was established in 1967. At the time, Ford was the largest domestic client of John Hancock’s Group Insurance Division. The concept of multinational pooling did exist at the time, though it was not widely practiced. Ford and John Hancock collaborated on the possibility of reinsuring and pooling the employee benefits plans of Ford’s overseas operations.
The outcome of those discussions was that the IGP network was founded, with Ford as its first client, when the 12 original partners executed formal agreements on October 31, 1967.
Ford’s partnership with John Hancock continued as the IGP network developed further, and indeed continues to this day. Some of the insurers that provided coverage for Ford’s international operations later became known as IGP “Associate Insurers” – after a thorough due-diligence process was completed.
A Network based on Partnership
As the IGP network expanded, there was a very conscious decision to select only the very best possible insurance partners in each country. IGP sought out the companies that specialised in employee benefits and group insurance, rather than opting for subsidiaries of any one particular insurance group.
This means that the IGP Network Partners, as they are referred to today, have the product and service range, expertise and market know-how that only a specialised company can provide. This is one of the important ways in which IGP differentiates itself from its competitors… who our Network Partners are.
The bottom line is we believe that having the best possible choice of local provider for our customers is more important than having partners that happen to be subsidiaries within a given group of companies.
The number of countries in which IGP operated grew quickly in the early years and continued to do so over time. Today we can provide coverage in more than 70 countries.
John Hancock: “Network Manager”
John Hancock has operated as the “owner” of the IGP brand and the manager of the IGP network. Each of the Network Partners participates in IGP by virtue of having entered into a bilateral agreement with John Hancock.
In nearly all countries in which IGP operates, John Hancock shares in the risk under each local group insurance contract included in IGP.
The fact that John Hancock shares in the risk under participating contracts is very important. John Hancock therefore shares in the fortunes – good or bad – with our partners.
John Hancock exercises its fiduciary role to protect the interests of our customers and Network Partners, but also those of the company itself. We have common objectives with each of the stakeholders.
1981: The world’s first Small Groups Pool: SGP
An important development in the multinational pooling market was the development by IGP of the first multi-employer small groups pool.
SGP is designed to assist customers taking their first steps in developing a multinational pooling account. When a multinational first sets up a pool, the volume of coverages included in it can be relatively small. This means that results in the early years, before a certain critical mass has been achieved, can be volatile. Adverse claims experience can have a greater impact on a smaller pool. Inclusion in the IGP SGP offers protection for pooling accounts during their earlier stages of development.
Today, IGP’s SGP covers well over ¼ million employees under nearly 1,800 group insurance contracts.
1993: IGP’s First Captive client
Many multinationals have a Captive insurance company which bears Property & Casualty (P&C) risks associated with their company’s activities. Historically, employee benefits risks were not borne by the Captive. But that has changed over the past decade or two. There is an increasing interest among multinationals to have their Captive participate in the risks underlying the EB plans within their organisation.
For IGP, because we have been operating on the basis of reinsurance for the past 52 years (including retrocession of some of that business), it is a relatively simple matter for John Hancock to retrocede coverage to a client’s Captive insurance company.
Indeed, John Hancock has been doing just that for many years, with our first Captive retrocession arrangement dating back to 1993.
IGP receives very positive feedback from its existing Captive clients, complementing us on the accuracy and timeliness of our reporting and “IGP’s superior customer service”. It’s not too surprising then that we anticipate healthy growth in IGP’s portfolio of Captive clients over the coming years.
Growth of the IGP portfolio
As is evident in the below chart, IGP’s growth over the years has been impressive. Client feedback suggests that this is because we provide good service, are committed to this business for the long term and because we keep our promises.
Today, IGP has over 800 multinational corporate clients.
Current market share
IGP is the largest network overall for Pooling and EB Captive arrangements combined, with impressive market share percentages*:
We are nevertheless focused on continued growth… we’re still hungry!
The advantages of multinational pooling continue to include improved cash flow, reduced expenses, International Dividend potential and access to information on plan design, funding and utilisation.
Nevertheless, the requirements and demands of multinational employers have changed. This is in part because of the involvement of Risk Managers and Finance professionals. 25 years ago, the contact people at IGP’s clients were HR and Employee Benefits Managers, today they also include Risk Managers and people reporting up to the Corporate CFO.
Risk Managers are accustomed to receiving regular updates on claims under their global Property & Casualty (P&C) coverages. Consequently, timely reporting has become increasingly important in the employee benefits field as well. IGP has developed an extensive and technologically advanced Medical Claims Reporting platform in response to these demands.
Another fairly logical next step in the development of multinational pooling is the move to get the savings that can be achieved by combining coverages globally… earlier. That is, rather than waiting for an International Dividend retrospectively – assuming favourable experience – one already anticipates this cost reduction in the up-front pricing of the local contracts. Over the years local premiums have already been coming down, as local insurers already have built some of the savings achieved by international risk spreading into the local premiums they quote. But further reductions are possible if the multinational employer is prepared to commit to a certain volume of coverage with a preferred provider. IGP is one of the players in the market that is in a position to offer such “Global Discount” arrangements. And we are continuing to fine tune our product offering in this market segment.
IGP: Long History, Bright Future
IGP’s successes in the areas of Pooling, management of Captive programmes, our advanced Medical Claims Reporting platform and our next generation Global Discount product that we will introduce in the not-too-distant future all suggest that the future is looking bright for us.
IGP is committed to this market and we look forward to serving our clients and their advisors for many, many years to come!
Geraldine Pangaro, IGP Head 1994-2006, provides an insider’s perspective of IGP
In the early 1970’s I was hired by a multinational pharmaceutical company to manage their international benefit plans and their costs. Most companies had head office oversight for major expenditures by their foreign operations; for example, a subsidiary manager couldn’t purchase a piece of equipment for $100,000 without someone from headquarters also signing off.
But often that same subsidiary manager could purchase benefit programs – life, medical, disability and pensions – without any head office input. While the annual expenditures might be smaller, benefit liabilities are longer term and infinitely more expensive, especially when pensions are involved.
Partnering with an international pooling network like IGP solved two problems for me. First was access to better information. The International Experience Reports provided an annual accounting for each of the benefit plans insured by network partners. Second and more importantly there were economies of scale. After all, insurance is just the law of large numbers.
The bigger the group you insure, the more predictability you have. The more predictability you have, the less risk you take. The less risk that is taken, the lower the cost. Pooling enabled multinationals like ours to take advantage as mass purchasers of employee benefits to buy their insurance on a more cost-effective basis by combining the plans they were buying locally into a single worldwide pool. Mortality and morbidity gains in one country could be used to offset losses in another.
Shortly after becoming an IGP client, I moved to Boston and became part of the IGP team, eventually heading the organization for the last 12 of my 35 years with IGP. During that time, IGP grew to become the largest international network measured by clients in force.
As one member of Hancock’s Management Committee expressed during an annual product review “Oh what mighty oaks from tiny acorns do grow.”