Reinvesting captive dividends or plan profits into healthcare prevention, precaution and early treatment can make a significant cost mitigating impact on rising medical costs on employee benefits programmes, according to a panel speaking at Zurich’s Captive Dialogue Day on 25 June. 

Medical inflation is currently running at about 10% a year, which means that if a company has around 70% of its EB programme running through its captive, then the costs for the captive will be doubling every eight years. 

“EB has not seen a soft market in years, so it’s critical to get ahead of the curve in terms of what you are going to do from a claims management standpoint,” said Bill Fitzpatrick, senior VP Europe at Granite Management. 

Fitzpatrick said part of staying ahead of the curve is preventative, but also involves gaining a deeper understanding of what is driving claims. 

What networks are now frequently doing is providing firms with helpful diagnostic data. 

“That data starts to give us insight into what’s really driving claims,” Fitzpatrick said. 

“For example, if we look at places like Dubai, they’ve got high levels of diabetes and obesity. In areas like Mexico, it’s obesity problems and gastrointestinal issues.” 

With that information, Fitzpatrick said captives can design targeted programmes to address specific conditions and design strategies to better control costs. 

“If you’re considering placing employee benefits into a captive insurer, it’s important to have a clear strategic vision of what you’re trying to accomplish for the organisation,” he added. 

Agith Jan Juddu, global lead for insurable employee benefits at Siemens Healthineers AG, said any dividends from the captive could be reinvested into the firm’s benefit and healthcare plans potentially funding prevention and precaution models also opening the door to early intervention and treatment initiatives. 

“If the captive is generating dividends, do not celebrate too loudly, instead, take a closer look at how those dividends can be used and redistributed into the funding plans ad so support the captive’s EB programme,” Juddu said.  

“Between quantity and quality there is a lot to gain for employees, their family members and dependents by investing in the strength of the benefits plans. 

“By supporting employees, the corporation gains in a better employee satisfaction and talent attraction/retention,” Juddu added. 

Juddu said that even with a 10% return, medical inflation rates can still hit as high as 17% cost increase in some countries, by knowing your cost drivers and claims data you can also better manage the consumption and tailor plan design. 

“So, while dividends are certainly a nice benefit, the real value lies in using them to actively manage and strengthen your program,” he explained.  

“The captive in that sense is a strong enabler for a consistent benefits strategy also focussed on the real corporate specific needs where potentially an insurance market might not be able to offer the dedicated covers.” 

Christian Mainguy, senior global consultant at Workplace Options, a provider of employee wellbeing solutions, said early prevention is critical when it comes to supporting employees and reducing claims costs. 

“First and foremost, it directly impacts organisational performance,” he said. “If a company wants to perform well, its people need to thrive. Disengaged employees – those who are present but not performing – can significantly harm business outcomes.” 

Mainguy said there are also hard costs associated with mental health issues in the workplace. 

“Take burnout, for example: in some European countries, the estimated cost of a single burnout case can reach €80,000,” he said. 

“Given that mental health has now become the leading cause of disability in many countries worldwide, addressing this issue is not optional – it’s essential.” 

Mainguy said that beyond performance and cost, it’s also a matter of reputation for a business. 

“Organisations are increasingly expected to take psychosocial risks seriously and demonstrate that they care for their people,” he said. 

Reto Heini, regional distribution manager at Zurich Global Employee Benefits Solutions, said EB policies are always coordinated with the social security system in a given country.  

“Since social security differs widely from country to country, the benefits will not be the same if someone live in England, Germany, or France for example,” he said. 

By definition, because this coordination exists, the benefits are completely different from one jurisdiction to another,” he said. 

“There are also variations in definitions, limits, waiting periods, lump-sum payments versus annuities, and more.” 

Heini noted that captive can utilise arbitrage in these instance. 

“A captive might decide, for example, to invest 20% of its time in countries that generate 80% of the premiums – focusing first on those that are easy to transfer or have high premium volumes,” he said. 

“More complex countries can be addressed later – for example, Denmark or Belgium, or those with stronger worker council involvement, like France, which tend to be more challenging.”