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Location, location, location may be the traditional mantra of the real estate business, but it applies with equal force to benefit managers' selection of their international benefit networks.

A network's ability to provide coverage in the countries in which companies do business, as well as flexibility, quality service and cost effectiveness, are the most critical factors in choosing an international benefits network, benefit mangers, consultants and others say.

Of little, if any, significance, is the ownership structure of the particular network, benefit managers and others generally agree (see story, page 10).

Location, however, is important. When Salt Lake City-based Steiner Corp. decided to work with an international benefits network, for instance, it chose Insurope because, "basically, they were the ones who had operations or affiliates in countries where we had operations," said Carol McCormick, risk manager for the linen supply service company. She said network ownership was not a factor in the decision at all.

Similarly, when Oakbrook Terrace, Ill.-based Platinum Technology Inc. narrowed its original field of eight candidates down to its final selection, John Hancock International Group Program, a major factor was its locations, said Marc Ugol, senior vp-human resources for the software company.

"We could see that each of our international subsidiaries had a local insurance provider that they would be able to work with to help manage the delivery of those benefits programs to our employees in each of those country locations," said Mr. Ugol.

Sven Grasshoff, vp at Citibank in Long Island City, N.Y., works with four networks. "We operate in 100 countries, so we need the geographic coverage, especially as we're entering the emerging markets," he said.

"What our clients are looking for, first of all, is breadth of coverage," said Liz Partyka, a consultant with Lincolnshire, Ill.-based Hewitt Associates L.L.C. Benefit managers look at "where the network is located relative to where they have locations, as well as how much of their business is going to be included in a network," said Ms. Partyka.

"Our clients are certainly looking for breadth of coverage," agreed Paul Shimer, managing consultant with William M. Mercer Inc. in Hartford, Conn. "If a network has locations where the clients have locations, that's a very important issue. If they don't, it's a problem."

Flexibility is a major consideration as well. "We want a network that provides us with innovative and flexible benefit design options, so they have to be fairly progressive, and they can't tell us, 'This is the only way we do it in this country,' " said Citibank's Mr. Grasshoff.

"One of the largest criteria that we use is innovation -- an ability to work with us and design new policies and programs," said David Koonce, manager-international compensation, benefits and employee practices for the General Electric Co. in Fairfield, Conn. GE works with five networks.

For instance, in many locations, most notably in Europe, contracts provide both insurance and pensions. The Aetna/Generali International Benefits Network, though, agreed to unbundle its insurance and pension products so that the network would maintain the insurance portion but GE could take on the investment opportunities within its pension plans, said Mr. Koonce. "This is quite innovative," he noted.

The network was similarly flexible in Japan, where GE recently bought an insurance company and wanted its insurer to provide benefits to GE employees. In this case, Aetna/Generali was able to persuade its affiliated insurer to work side by side with GE on the issue, said Mr. Koonce, who commented that Insurope has been similarly flexible as well. "We love this kind of stuff," he said.

It was the willingness of the Hancock network to take a pool the size of the "pretty well scattered" 150 foreign-based employees of Bedford, Mass.-based Shiva Corp. that encouraged the company to work with that network, said Rick Biedermann, manager of compensation and benefits. The software company has, for instance, just three people in Germany. "From our perspective, we went with the most readily available option," said Mr. Biedermann.

Benefit managers "want the networks as their partner going forward to show a level of flexibility, which is required to continue a relationship for a long period of time," said Christopher Burns, an international consultant with the Towers Perrin Global Resources Group in New York.

Benefit managers for larger companies in particular are "looking for greater flexibility in the financing of their overseas benefits," said Robert Pickrell, retired Insurope president and now an independent consultant.

For example, this could involve including the U.S. life and/or disability insurance into the multinational pool. "It can be done in a number of different ways, but, in essence, the client is attempting to use his buying power based on the (total) number of employees to reduce his overhead costs," said Mr. Pickrell, who noted several networks are now offering this option.

Those networks include MAXIS, created earlier this year by Metropolitan Life Insurance Co. and the AXA Group, according to New York-based Barry Slocum, who is responsible for MAXIS' marketing and sales. "If that concept isn't something they want to do today, it may be something they want to do five years from now," said Mr. Slocum.

Some networks "will be far more flexible than others," said Carol Kaplan, director-global compensation and benefits at Holland, Mich.-based Donnelly Corp., an automotive parts manufacturer.

"There are some groups that will do some good cash-flow things for you and others that are not as willing to step out of the box," said Ms. Kaplan.

Service also is a critical factor. While cost is important, the most important benefit you can offer your clients is service, said Gianni Ban, New York-based executive vp of the Aetna/Generali network.

Service along with cost effectiveness are the major factors in selecting a network, agreed Alex Vuitovich, director-international benefits for Whitehouse Station, N.J.-based pharmaceutical manufacturer Merck & Co.

"If they can't provide what the local subsidiary company is looking for, then it's useless to select them" no matter how good a network looks on a financial basis, Mr. Vuitovich said.

Service is "critical to many clients," said Towers Perrin's Mr. Burns. Benefit managers "want to feel comfortable with whom they're going to be working with," both at the pool's head office and at the local level, he said.

Part of this involves the lines of communication within a network, say observers. Good reporting tools and a network's ability to keep the benefit manager well-informed and well-advised are important, said Donnelly's Ms. Kaplan. "Are they going to keep you up to date on changes?

"I know some of the issues we've faced in the past have been things like the (local insurance personnel) going directly to the subsidiary office and making deals with them instead of keeping the head office, the U.S. office, involved, and so changes are made without your knowledge, and that's something I would want to have some assurance wouldn't happen," Ms. Kaplan said.

"A lot depends on the individuals" involved, though, said Ms. Partyka. She said she has had experience within one network where one of its representatives in the United States "was just dynamite, just a go-getter, very responsive."

But that same network had another individual working with companies in another region of the country who was unable to get the coverages in place. "If the individual involved is not as proactive. . .things won't get done," said Ms. Partyka.

Cost efficiency is a factor as well. The expense factor "is a big selection criterion, because this is a financial transaction," said Ms. Partyka.

"Clients are looking at it for the cost savings, so to the extent a network has lower operating costs that can be translated into lower administrative costs, lower retention costs, that is a selling point," she said.

"If we had favorable claims experience, we wanted the greatest dividend return to the corporation as was possible, given the construction and design of that particular network," said Platinum Technology's Mr. Ugol.

David Brandies, vp-compensation and benefits at the U.S. headquarters of pharmaceuticals manufacturer Rhone-Poulenc Rorer Inc. in Collegeville, Pa., said his company's local subsidiaries have

the option of participating in a network pool.

As a result, "at the end of the day, if you're trying to convince a (general manager) that it makes sense to pool risk into a multinational pool, one of the things he's going to want to know is, are the rates as good, if not better, than what he can negotiate individually" with the local insurer, said Mr. Brandies.

If the general manager also can be told he will receive a "large chunk" of any dividend the company receives to help pay operating costs, then it becomes a "good thing to consider," Mr. Brandies said.

Competitiveness is a consideration here, said Bob Duty, director of international benefits and expatriate services at pharmaceuticals manufacturer Warner Lambert Co., based in Morris Plains, N.J. "We typically look at maybe 10 to 12 networks but concentrate on maybe five or six," looking at how competitive they are from a cost and service perspective within the countries where they operate.

Tenneco Inc. tries to avoid using just one insurance network on a global basis for competitive reasons, said Dick Mitchell, vp-compensation and benefits at its Lake Forest, Ill.-based packaging operation. "We like to keep at least two, possibly three, on a global basis," he said. "It just kind of keeps them honest. It keeps the competitive nature there but also may expand global coverage," said Mr. Mitchell.

"There might be a network that doesn't have coverage in one country, and the other might be able to fill that void, so it also helps us to select which network to work with," said Mr. Mitchell.

"Obviously, one of the advantages of having a network. . .is even if the rates are higher going in for the network, you can leverage within the network, and say, 'Hey, get your cost down,' " he added.

"If they want to keep your business, they'll usually comply, whereas it's more difficult to do that with a local provider, because they won't be losing a large share of the business and they can't absorb those costs like a large network would."

Complications when it comes to switching may be a factor in staying with a particular network, say some observers. They note the only companies that can avoid those complications are fast-growing start-ups just establishing their benefit networks.

"Most employee benefit managers manage what they've inherited. The number of new pool establishments is growing increasingly rare," said Bob Wesselkamper, a principal and senior vp with Sedgwick Noble Lowndes in Chicago.

Furthermore, if a company seeking to establish a pool already has established relationships with three or four insurers who belong to a particular network, it is "so much easier to take that base" and add to it, rather than to start from scratch, said consultant John Edelman, area vp-international benefits for Arthur J. Gallagher & Co. in Itasca, Ill.

The "terms and conditions associated with local contracts make it very hard to change providers in certain parts of the world, especially Europe," so it makes sense to take this approach, Mr. Edelman added.

Donnelly's Ms. Kaplan agreed that it is difficult to switch networks. As a result, "you might look at things a little bit differently if you were starting a pool in an existing location or from a brand-new location where you didn't have a history," she said. "You'd really have to have a good deal to make a change. It'd have to be worthwhile."

Ms. Kaplan added, "If you've got something like a pension fund, you lose a lot of money by switching." Also, in the Netherlands, for example, a company may have a five- to 10-year contract, "and you don't make out by doing much switching."

However, a company that already works with one or more networks in Europe, Latin America and Asia but decides to expand into Central and Eastern Europe must determine whether its network is "capable of doing that. If not, I have to start looking at alternatives, maybe another network," said Mercer's Mr. Shimer. "You kind of evaluate your network on the basis of where they operate and where they meet your needs."

Every company is unique, observers emphasize. "Each employer and benefit manager will judge a pool and weigh the importance of each criterion based on their own facts and circumstances," said Mr. Wesselkamper.

He said he has had clients that have been keen on dividends, "and therefore disregard stability, and let competency suffer for the sake of maximizing dividends." Others, though, "absolutely hate the service they are getting from a particular network," and this will outweigh other considerations.

But whatever their particular advantages, no one pool is perfect, said Mr. Wesselkamper. "No benefit manager expects every network to be strong in every part of the world," said Mr. Wesselkamper, which is why many companies have more than one.

Mercer's Mr. Shimer agreed. "There's just no such thing as a network that stands out with the very best local insurance organization or product offering in every country around the world. That's why there are several different insurance networks.'