Webinar – Healthcare Insecurity: A Global Growth Impediment
A recent survey of business executives found that approximately 73 percent of companies surveyed deploy five percent of their workforce overseas. Companies striving to grow in today’s global economy need to have the reach and resources to position key personnel around the world. But a threatening impediment to that growth is the issue of Healthcare Insecurity.
Healthcare Insecurity is the indecision that can result when an individual falls ill while abroad and doesn’t know where to turn for treatment. Frequently, clinically unnecessary evacuation and unnecessarily expensive treatment can result, with sub-optimal patient outcomes becoming a risk.
Adding to the detrimental effects of Healthcare Insecurity is the increasing amount of political risk, not to mention terrorist activity that is compounding the stress levels of employees stationed overseas.
This one-hour webinar will delve into the topic of Healthcare Insecurity and tap expert resources to give companies guidance on, among other things:
- How to provide on-the-ground support to globally-mobile expatriates that increase their sense of security and encourage them to utilize local health care options.
- Developing a global program that provides employees with timely updates on issues that could impact their health and well-being, including political instability, pandemics, or terror threats.
- Determining whether a streamlined approach to vendor services for overseas employees might be the right fit.
- Finding the right mix of insurance coverages to both protect the company’s bottom line and provide for the health and welfare of overseas staff.
Feds Encouraging FCPA Self-Reporting
Companies can take a more proactive role in managing their Foreign Corrupt Practices Act (FCPA) exposures since the federal government launched a new program in April to encourage self-disclosure of misconduct.
The government’s focus on this area is much more robust now than it has been for many years. The good news is if companies voluntarily disclose a violation, they face much more lenient penalties.
The U.S. Department of Justice increased its FCPA unit this year by more than 50 percent by adding 10 new prosecutors, according to the Washington-based law firm Wiley Rein LLP.
In the spring of 2015, the FBI also began an effort to increase its presence in this area. That agency invested an additional $15 million for FCPA investigations and set up three new fraud squads, increasing the number of agents working on FCPA matters to 23 agents from five.
The FCPA bans U.S. companies and individuals from offering bribes or anything of value to a foreign official in an attempt to get or keep business.
“The government is putting their money where their mouth is in terms of their intention to aggressively investigate and prosecute these cases,” said Ralph J. Caccia, an attorney with Wiley Rein.
Caccia is a former federal prosecutor, who now defends companies and their executives in cases involving the FCPA.
The law firm hosted a conference call on June 9 to share trends and information on FCPA enforcement with other attorneys and corporate executives.
On the call, speakers said there are about 79 FCPA investigations underway, and about 80 percent of thoses cases have roots in China.
The industries that seem to “catch the eye” of investigators include pharmaceutical, health care, telecommunications and increasingly, financial services companies, Caccia said.
$133 Million in Fines
Government investigators are not looking at small cases where, for example, there’s a one-time bribe to get a shipment in early. They are focusing on the large cases that may result in big settlements, he said.
Larger targets result in increased settlements. In 2015, there were 11 corporate enforcement actions, with $133 million collected in fines.
So far this year, the SEC reached 11 corporate resolutions for settlements amounting to more than $506 million, according to Wiley Rein.
“They handled it the right way and got expeditious resolutions as a result.” — Kara Brockmeyer, chief, FCPA unit, Securities and Exchange Commission
This year’s settlement includes two non-prosecution agreements. In each case the companies self-reported the misconduct promptly, and they cooperated extensively with investigators, the SEC announced on June 7.
As a result, the companies were not charged with violations of FCPA and did not face extra penalties.
One company, Akamai Technologies, agreed to pay $671,885 after it found employees at a foreign subsidiary violated company policies by giving gift cards, meals and entertainment to foreign officials to build business relationships.
Nortek Inc. agreed to pay $322,058 after disclosing that a subsidiary made improper payments and gifts to Chinese officials to gain preferential treatment, relaxed regulatory oversight or reduced customs duties, taxes and fees.
“When companies self-report and lay all their cards on the table, non-prosecution agreements are an effective way to get the money back and save the government substantial time and resources while crediting extensive cooperation,” said Andrew Ceresney, director of the SEC enforcement division.
Kara Brockmeyer, chief of the SEC enforcement division’s FCPA unit, said in a statement that “Akamai and Nortek each promptly tightened their internal controls after discovering the bribes and took swift remedial measures to eliminate the problems. They handled it the right way and got expeditious resolutions as a result.”
Increase in Global Cooperation
To snare larger violators, federal agents are increasingly working alongside law enforcement and regulatory authorities in all corners of the globe to share leads, documents and even, witnesses.
The pilot program is designed to investigate and prosecute FCPA violations, while offering companies that voluntarily disclose violations up to 50 percent below the low end of the fine range, based on U.S. sentencing guidelines.
At the end of the one-year pilot period on April 5, 2017, the DOJ will determine whether to extend or modify the program.
In addition to voluntarily disclosing misconduct and fully cooperating with the DOJ investigation, companies also must take all appropriate actions to remediate the offense and surrender all profits from the violation.
Additionally, voluntarily disclosed cases may be acted upon and closed within one year from start of the investigation and the DOJ may not appoint a monitor afterward.
“If a company opts not to self-disclose, it should do so understanding that in any eventual investigation that decision will result in a significantly different outcome than if the company had voluntarily disclosed the conduct to us and cooperated in our investigation” said Assistant Attorney General Leslie R. Caldwell of the Justice Department’s criminal division, when the pilot program was announced.
At the end of the one-year pilot period on April 5, 2017, the DOJ will determine whether to extend or modify the program.
“The government is upping the ante in terms of what they expect to see in the way of cooperation in these cases,” Wiley Rein’s Caccia said. “They want companies to realize these violations can’t be viewed as simply the cost of doing business anymore, but that individuals could possibly go to jail.”
Appropriate Compliance Programs
Increased FCPA activity should compel changes in the way corporations conduct and document internal investigations.
Corporation should increase internal documentation to include not just what they are doing right, but also what has gone wrong and how it’s been addressed, said Daniel B. Pickard, an attorney with Wiley Rein.
“The Department of Justice continues to deputize private industry to investigate itself,” Caccia said.
Companies can stay FCPA compliant by conducting more sophisticated risk analysis and increasing periodic outside audits.
“It is undeniable we will see compliance changes matching enforcement trends,” said Pickard.
His firm sees corporations spending more money on compliance infrastructure, especially on the chief compliance officer, he said.
CCO salaries jumped in the past 12 months and those executives are getting more authority; frequently reporting to the CEO.
Buyers Beware: General Liability Outlook May be Shifting
The soothing drumbeat of “excess capital” and “soft market” to describe the general liability (GL) market is a familiar sound for brokers and buyers. Emerging GL trends, however, suggest the calm may not last.
Increasing severity of GL claims may hit some sectors like a light rain at first, if they have not already, but they could quickly feel like a pelting thunderstorm in others. A number of factors could contribute to the potential jump in GL prices for certain industry segments or exposures, possibly creating “micro” or niche hard markets in the short-term, and maybe even turning the broader market over the longer-term.
“There are trends we’re seeing that will play out slowly. Industries that carry more general liability exposure will and have been hit first and hardest, but it won’t apply across the board initially,” said David Perez, Senior Vice President and Chief Underwriting Officer, for Liberty Mutual Insurance’s National Insurance Specialty operation. “There is ample capital in the market today, which allows a poor performing account to move its policy frequently from carrier to carrier. Poorer performing classes, however, will likely face increased pricing for GL policies and a reduction in capacity.”
The good news for buyers is that they can take action today to lessen the impact these trends and the evolving market may have on their GL programs.
David Perez on the state of the GL market.
Medical and Litigation Trends Drive Severity
One factor increasing claim severity is the rising cost of health care, driven both by greater demand and by medical inflation that is growing faster than the Consumer Price index.
The impact of rising medical costs on commercial auto is well-known. Businesses with heavy transportation exposures are finding it more difficult to obtain coverage, or are paying more for it.
That same trend will impact general liability, just on a slower and more fragmented basis.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk.”
— David Perez, Senior Vice President & Chief Underwriting Officer, National Insurance Specialty, Liberty Mutual Insurance
“It takes longer for medical inflation to register through the tort system in general liability than it does in auto liability (AL) because auto claims are generally resolved more quickly,” Perez said. “But the same factors affecting severity in AL also exist in GL and as a result, it’s foreseeable that we will not only see similar severity trends in GL, but they may in fact be worse than we’ve seen in commercial auto.”
Industries with greater exposure to severity in general liability claims should be the first wave of companies to notice the impact of medical inflation.
“Medical inflation will drive up costs across the board, but sectors like construction and product manufacturing have a higher relative exposure for personal injury lawsuits.”
The impact of medical inflation on the GL market.
Beyond medical inflation, two litigation trends are increasing GL damages. First, plaintiffs’ lawyers are seeking to migrate the use of life care plans—traditionally employed only for truly catastrophic injuries—to more routine claims. Perez recalled one claimant with a broken thumb and torn ligaments who sought as much as $1 million in care for the injury for the rest of his life.
Second, the number of allegations of traumatic brain injuries (TBI) in GL claims is growing. It can be difficult to predict TBI outcomes initially and poor outcomes can be expensive and long tailed.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk,” notes Perez.
Changing Legal Landscape
Medical inflation and litigation trends are not the only issues impacting general liability.
Unanticipated changes in court interpretations of policy language can throw unexpected pressure on GL pricing and capacity.
Courts sometimes issue rulings interpreting policy language in a manner that expands coverage well beyond the underwriter’s original intent. Such opinions may sometimes have a retroactive effect, resulting in an immediate impact on not only open, but also closed cases in some circumstances.
Shifts in the Marketplace
In addition to facing price increases, GL brokers and buyers will be challenged by slightly shrinking capacity due to consolidation and repositioning among carriers in the marketplace. “Some major carriers have scaled back their GL writing, resulting in a migration of experienced senior management. As these executives leave, they take their GL expertise and relationships with them, resulting in fewer market leaders and less innovation,” Perez said.
“Additionally, there are new carriers coming into the business that may not have the historical GL loss data to proactively identify trends or the financial strength and experience to effectively service their GL customers and brokers. Both trends make it important for brokers and buyers to work with an insurer that is committed to the GL market and has the understanding and resources to help better manage risks impacting customers.”
Last year saw a high level of mergers and acquisitions in the insurance industry. Buyers should take advantage of that disruption to re-evaluate their needs and whether their insurers are meeting them. Or better yet, anticipating them.
What’s a Buyer to Do?
Buyers—and their brokers— should look to partner with insurers that can spot emerging trends and offer creative solutions to address them proactively.
What should buyers and brokers do, given the trends facing the GL market?
“Brokers and buyers should value insurers that have not only durability and a long history in the general liability business, but also a strong risk management infrastructure,” Perez said. “Your insurer should be able to help you mitigate your specific risks, and complement that with coverage that works for you.”
Beyond robust GL claims and legal management, Liberty Mutual also provides access to one of the insurance industry’s largest risk control departments to help improve safety and mitigate both claim frequency and severity.
In addition, notes Perez, “Even if a company has a less than optimal loss history in general liability, there can be options to provide adequate coverage for that company. The key is to partner with an insurer that has the best-in-class expertise, creativity, and flexibility to make it happen.”
By working closely with their insurers to understand trends and their potential impacts, brokers and buyers can better prepare for the possible GL storm on the horizon.
To learn more about Liberty Mutual’s general liability offering, visit https://business.libertymutualgroup.com/business-insurance/coverages/general-liability-insurance-policy.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.