Breakout 3: Benefits Administration in a COE Environment Shaka Maharajh Tony Dowd
Overview In the beginning. Mind the Gap! A view from our clients Typical Benefits Management Models and a focus on Administration Aon s Approach Wrap-up 3
In the beginning There was a professor called David Ulrich In 1996, he developed a new model for corporate HR functions The model proposed a differentiation of HR activity, dependent on the extent to which each role was processor people-oriented and strategically- or operationally-focused Future / Strategic Focus P r o c e s s Strategic Partner Administrative Expert Change Agent Strategic Partner P e o p l e Day to day / Operational Focus David Ulrich - Human Resource Champions: The next agenda for adding value and delivering results (1996) 4
HR roles in the Ulrich Model Three Legged Stool HR Business Partners Work in partnership with operational managers within a business unit to influence and steer strategy and strategy implementation Linked through HRIS HR Deliver competitive business advantage through HR innovations in areas such as reward, learning, engagement and talent management Centres of Excellence Shared Services Provides low-cost, effective administration for all the routine transactional services across the business 5
Benefits administration defining the scope Benefits administration covers a wide range of potential activities The key administration functions which arise with our clients are: Member queries New joiner enrolment in programs Member life event updates Member forms distribution New member briefing Leaver removal from programs Social security and other filings Invoice tracking Invoice processing 6
Mind the Gap! The implementation of the Ulrich model has removed local HR/Benefits Admin resources Intention is to provide transactional (admin) services from Shared Service functions or sometimes the COEs Overall the Ulrich model lacks clarity on how / where administration services should be delivered Insurance market is still very much locally focussed, leading to the Administration Gap Traditional Ulrich Local Client Local Client Local HR/ Ben Admin Local Insurer COE Shared Service Administration Gap Insurer is still looking for local admin Local Insurer 7
1 Administration a view from our clients 8
Disconnect between where expertise sits and plans are managed Local business leaders Different leaders for material benefits Separate individual Current manages in international +3 years locations Different regional leaders for material benefits At geographic levels HR/finance leaders manage benefits as additional responsibilities Not outsourced Local benefit leaders report into local mgmt. Current +3 years Current +3 years Current +3 years Current +3 years Current +3 years Current +3 years Current +3 years Strategic benefits decisions -15% -25% 25% 35% -8% 35% 54% Corporate benefits leader -23% 26% 34% -17% 34% 45% Corporate leader for international benefits (if applicable) -17% -26% 25% 32% -8% -16% 34% 41% Regional leaders (if applicable) -23% 30% 31% -17% 38% 38% Concentration of benefits expertise -19% -21% 33% 27% -6% 42% 44% Benefits management in local country -35% -38% 19% 7% -18% -35% 32% 15% Outsourcing benefits manager. function -62% -22% 10% 6% -46% -28% 18% 8% Reporting relationships for benefits mgrs. -29% -31% 20% 20% -15% -15% 36% 34% Corporate level One corporate leader responsible for all benefits One corporate leader responsible for home country and international locations One regional responsible for all benefits Global centre of expertise Dedicated benefits leaders with requisite skills in local countries Outsourced with exception of countries with large operations Solid line reporting into corporate benefits leaders Benefits managed locally by generalists Very much like A Somewhat like A 9 Somewhat like B Very much like B Benefits expertise sits globally
Operational responsibilities typically sit with local HR Market competitiveness -11%-10% -8% 75% 43% 53% Design Emphasis on individual responsibility Harmonisation -6% -6% -6% -6%-5%-12% 55% 72% 27% 34% 35% 30% Efficient design of benefit plans -12% -9% -17% 72% 37% 42% Financial mgmt. Operations Efficient financing Investment management Pension de-risking Externalisation of liabilities Administration Legal and regulatory compliance Employee communications -14%-11% -25% -15% -23% -12% -19% -10% -44% -55% -61% -54% -6% -14% -21% -6%-13% -6% -1% -2% 57% 37% 53% 50% 52% 57% 48% 10% 14% 9% 18% 14% 17% 12% 14% 31% 31% 33% 64% 64% 74% Admin, communications and compliance typically managed by local HR Vendor management -19% -5%-17% 62% 26% 57% Local finance Regional Finance Corp Finance Corp HR Regional HR Local HR 10
The administration status-quo seems unlikely to change any time soon Defined Benefit Management Defined Contribution Management Multinational Pooling and insurance broking Asset pooling Captive and pooling strategy Multi-country fiduciary asset management Cross-border financing of European pensions Multi-country administration solutions Administering flexible benefits Outsourcing solutions for benefit functions Data and information management solutions Technology platform for financial management and risk insights Flexible benefit platforms Total rewards platform 37% 24% 13% 38% 24% 7% 42% 23% 14% 19% 15% 10% 4% 32% 19% 8% 20% 3% 8% 19% 3% 4% 18% 6% 5% 16% 7% 3% 16% 7% 6% 40% 17% 5% 41% 11% 2% 22% 7% 8% 38% 4% 12% 24% 23% 19% 28% 17% 17% Clients not typically looking for support with administration of benefit plans Important Very important Effective Very effective 11
2 Global Benefits Management Models and a focus on administration 12
Global Benefit Management Models Decentralised Model Loose Corporate Oversight Centre of Excellence model Outsourced benefits management Design Reviews are initiated & decisions made locally No global philosophy or guidelines Some design decisions are made by HQ Region heads may influence decisions Philosophy and Guidelines provided but not enforced Philosophy and guidelines are enforced Major decisions come for global approval DoA matrix in place for decision making Strict global design frameworks Core benefit components set globally All design decisions taken by COE Financing Fully insured contacts No multinational pools No global funding or investment guidelines Risk is measured locally Multinational pooling but decision to pool may be made locally Global investment policy and funding guidelines (but not strictly enforced) Active pooling strategy Regional solutions in place as appropriate Global tracking of premium spend and savings Effective pooling frameworks Alternative financing explored Global purchasing deals Providers Choice of providers insurer, broker, actuary, administrator, etc., left to local management Multiple vendors Preferred provider network established globally Global advisors used for specific projects Preferred-provider network mandatory Active relationships with key providers Global consultant advising HQ Global MSA and SLA with key providers Global pricing and discounts Multi year contracts Administration Administration managed locally to suit plans No central payroll or HRIS systems Flex and other portals determined locally Administration managed locally to suit plans No central payroll or HRIS systems Flex and other portals determined locally Administration managed locally to suit plans Administration processes streamlined at local level Shared service support for some activities Outsourced administration model Centralised payroll and HRIS system External providers and shared services managing administration Most prevalent today Observed Trend 13
The spectrum of benefit administration models Administration has typically been delivered within country to suit the local market programs In recent years the global trends of outsourcing and centralisation have led to the emergence of other models The table below shows the book ends of the spectrum Many other permutation sit within this spectrum that fit with a company s organisational structure Headlines Typical Company profile Rationale for this approach Local administration Administration is run in-house locally to suit local plans Little or no involvement from global teams Decentralised global operating model Relatively small global headcounts In-country administration resource Inertia Lack of scale to change Strong in-country administration resource Central / outsourced administration Administration is centralised wherever possible Administration is outsourced to 3 rd parties where possible Typically linked to global payroll or admin system Some administration still remains locally Centralised global operating model Centres of Excellence in place to run functions Comfortable with outsourced functional teams Relatively large global headcounts Global objective for centralisation Improved efficiencies from outsourcing / centralising Improved governance Leverage scale 14
Benefits administration where can it be done? Item Can it be delivered locally? Can it be delivered out of market? In-house 3rd party In -house 3rd party New joiner enrolment in programs Yes Yes Yes Yes Leaver removal from programs Yes Yes Yes Yes Invoice processing Yes Partial Partial Partial Invoice tracking Yes Yes Yes Yes Member queries Yes Yes Difficult Difficult Members forms distribution Yes Yes Difficult Difficult Social security and other filings Yes No No No Member life event updates Yes Yes Yes Yes New member briefing Yes Yes Difficult Difficult 15
Administration Model 1 Classic local in-house administration Description Key parties involved Aon role Pros Cons Suited to All benefits administration is owned and managed by the local in-house client teams The local broker / consultant / 3rd parties will support on activities as agreed locally The local HR team is the key stakeholder in many cases a dedicated administration resource For small headcounts the administration maybe owned by a generalist or someone in a finance role Minimal if Aon is the broker or consultant locally then they may support on admin as requested Natural alignment with the administration requirements Close relationship with employee needs The model can handle ALL of the local administration Fits with local benefit provider and third party operating models Inefficient and expensive delivery model Key man risk linked to the local administration team Role misalignment for small headcount companies (eg finance or market leaders taking responsibility) No centralised risk oversight Decentralised organisations with critical employee mass in most countries Organisations without global payroll and/or HR systems 16
Administration Model 2 Streamlined local in-house administration Description Key parties involved Aon role Pros Cons Suited to Benefits administration remains local but third parties take on as much responsibility as possible Administration processes are reviewed to ensure maximum efficiency Local HR continue to own the administration processes The delivery of administration delivered between HR and third parties Aon acts as the broker and supports the administration for the programs managed wherever possible Natural alignment with the administration requirements Close relationship with employee needs Efficient delivery of administration Low frictional costs of implementation Fits local insurers operational model Aon can provide centralised information where they are supporting Change management of moving to the new model Key man risk linked to the local administration team Local client teams involved in a lot of administration Organisations without global payroll and/or HR systems Works with small or large headcounts in country 17
Administration Model 3 Partial centralised and outsourced administration Description Key parties involved Aon role Pros Cons Suited to The ownership for benefits administration now split between the local and global client teams Suitable tasks (eg leaver / joiner transactions) dealt with globally The remaining local tasks delivered as per models 1 or 2 Local and global HR teams manage different aspects of the administration Third parties often involved as per model 2 and in support of the administration delivered centrally Aon typically acts as the broker as per models 1 or 2 Aon can additionally support the administration managed globally / secure transfer of data Can provide efficient delivery of administration Economies of scale by delivering administration globally Can fit local benefit providers and third party operational model Global oversight of data protection can be provided Responsibilities can be confused with multiple owners of different administration tasks Model is immature and not suited to all local insurance markets HR locally still involved in the administration Implementation costs Centralised organisations with global HR and / or payroll system In-country headcounts large enough to justify the change management and implementation costs 18
Administration Model 4 Fully outsourced administration Description Key parties involved Aon role Pros Cons Suited to To the extent possible the benefits administration is managed by a third party The administration is delivered by a combination of central teams (as per model 3) and a local third party Some residual administration still remains with the local client teams Usually a single third party is appointed to manage all of the administration around the world Local subsidiaries of the third party (and / or others) deliver the local administration Local HR still involved as escalation and residual tasks Aon would act as the local broker. Aon is also able to work as the global administration partner under this model, utilising global technology platforms Efficient administration delivery Local client removed from the administration to the extent possible Opportunity for improved governance and reporting from the third parties High implementation and ongoing costs Significant change management and not suited to all local insurance markets Local insurers not used to dealing with out-of-country teams eg. local language only Mismatch between global and local processes Very large organisations with global or regional payroll / HR systems Companies aligned to the outsourced delivery model for these non-core services 19
3 Aon s Approach 20
Bridging the Administration Gap Scope of Aon s COE capabilities Item New joiner enrolment in programs Can it be delivered locally? Can it be delivered out of market? In-house Aon In-house Aon Yes Yes Yes Yes Leaver removal from programs Yes Yes Yes Yes Invoice processing Yes Partial Partial Partial Invoice tracking Yes No Yes Yes Member queries Yes Yes Difficult YES (via GI) Members forms distribution Yes Yes Difficult YES (via GI) Social security and other filings Yes No No No Member life event updates Yes Yes Yes Yes New member briefing Yes Yes Difficult Difficult 21
Global Administration solution summary Enrolment and Events Annual renewal Newly eligible Life events Status changes Dependant age out administration Beneficiary maintenance Eligibility Messaging and Communications Benefits portal Online plan information Enrolment notifications Plans and Costs Benefit follow-up processes Dependent collection Beneficiary collection Customer Service Coverage termination Self-service for web and mobile Customer service Call tracker Personalised communication Employer Support Online reporting Employer tools Stewardship meetings Case management Data Transfer and Management HRIS and payroll integration Ongoing carrier interface management Additional Services Supporting document upload* Claims management* Total Rewards Statements* *Optional service 22
How it works Client Data Provider Payroll HRIS File Input Provide employee info Client sends data to Aon Aon loads data and identifies employee scenarios (new hires, transfers, salary changes, terms, etc.) Eligibility Rules On-target Delivery Eligibility rules in Greater Insight create a personalised experience Applied real-time, rules adapt plan eligibility and site content as needed Greater Insight Employee Portal Online Enrolment Employees learn about their benefits and make their selections Access to see current coverage and benefit info available any time Provider/Payroll Files Provide election info Aon sends election information to providers and payroll through electronic data feed Reporting provided to client 23
4 Wrap-up 24
Wrap-up The Ulrich model has been the bedrock of HR structures for c.20 years The insurance industry still relies on local processes and interfaces to meet policy admin needs. The resulting Administration Gap leads to issues in a COE / SSU environment A number of models have been deployed by companies to manage Benefits Admin Aon can help to bridge the Administration Gap via utilising our global technology platform 25
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