Foreign voluntary workers comp offers extra protection to overseas workers

For U.S. executives assigned to work internationally, foreign voluntary workers compensation coverage can provide peace of mind and additional protections beyond domestic workers comp insurance if they're injured on the job.

Unlike domestic workers comp insurance, which is compulsory in most U.S. jurisdictions, employers aren't required by state law to carry foreign voluntary workers comp insurance. But experts say the coverage is being increasingly used by mid-market employers that want to lower their risks and protect their employees working outside of the United States.

“Any company that has a worker traveling overseas should have this coverage,” said Robert Callard, managing partner of Robert Callard & Associates L.L.C. in Seattle and an international insurance consultant.

Foreign voluntary workers comp extends a company's U.S. workers comp policy to cover a U.S. employee's work outside of the country. The coverage can be sold as an endorsement or as a separate policy, and is often part of an international insurance package that also would include general liability, business travel accident, kidnap and ransom, or other insurance lines.

If a worker is injured in another country, the policy pays workers comp benefits based on the U.S. state in which the person was hired. In addition to standard medical and indemnity benefits, foreign voluntary workers comp also can cover endemic diseases, such as malaria or dengue fever, and repatriation costs to transfer an injured worker to adequate medical facilities.

The policy typically includes a point of contact for injured employees that can help facilitate their care in a foreign country, Mr. Callard said.

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“If you're injured overseas, you make a phone call to an 800 number or call them collect, and they arrange everything for you,” Mr. Callard said.

Pricing for foreign voluntary workers comp differs from domestic workers comp pricing. While domestic policies are based on an employer's industry and loss experience, foreign voluntary comp weighs factors such as the length of a worker's trip, the type of work being performed, and security or safety concerns in the country where the employee will be working.

Foreign pricing can differ from domestic workers comp pricing if the foreign work is considered less risky than a company's traditional work, said Steve Zrebiec, senior product manager for workers comp at Zurich North America in Schaumburg, Ill.

“In the United States, it might be a mining risk,” Mr. Zrebiec said. “But if they're not doing mining abroad, they're not going to treat it the same way it'd be treated in the United States. That would be reflected in the pricing.”

The coverage is relatively inexpensive. A company typically can expect to pay about $2,500 in minimum premium per policy year for an international insurance package that includes foreign voluntary workers comp and additional coverages, Mr. Callard said. That pricing is based on a company that schedules 15 international trips a year.

Although most domestic workers comp policies usually provide coverage outside of the United States, experts say the voluntary policy can provide additional protection for employees who are injured during international work.

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First, some states limit the length of time that a domestic workers comp policy can cover an employee working outside of the country, Mr. Zrebiec said. If an employee is injured outside of that time frame, it could leave the company open to a lawsuit if it doesn't have a foreign comp policy, he said.

“A state can change what's defined as coverage abroad ... at any time, so this is kind of providing a "belt and suspenders' approach,” said Mr. Zrebiec, who noted that a foreign policy can cover workers for an extended period of time.

Secondly, foreign voluntary workers comp claims are filed directly with the insurer and are nonreportable to state workers comp regulators, said Mary Beth Pittinger, vice president and workers compensation executive underwriter for Chubb & Son Inc. in Whitehouse Station, N.J. That can help prevent foreign comp claims from increasing a company's domestic workers comp pricing.

“Typically when we have losses on foreign (voluntary), they can be sizable,” Ms. Pittinger said. “So it could certainly impact an insured's (experience modification) for quite some time. But with the foreign (voluntary) policy, the loss experience is not reportable to the state.”

Lastly, Ms. Pittinger said exclusive remedy provisions apply for foreign voluntary workers comp policies, preventing employers from being sued by employees injured abroad except in cases of negligence.

“This works the same way any state work comp policy works,” she said. “It would be the sole remedy for them to recover medical expenses and lost wages.”

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Experts say interest in foreign voluntary workers comp mirrors an uptick in global business travel. U.S. business travel increased by 7.6% in 2011 and is expected to grow by about 4.6% in 2012, according to a report released this spring by Visa Inc. and the London-based Global Business Travel Association. Total U.S. spending on international outbound trips is expected to reach $33.5 billion this year, up 5.5% from 2011, the report said.

Foreign coverage seems to be particularly appealing for manufacturers, small and midsize professional firms, nonprofits that do global work, and colleges and universities that send faculty or researchers to work in international locations, said Bruce Cohen, Washington-based managing director of Marsh Inc.'s international casualty practice.

“You'll often see the small (or) midsize firms go to more difficult geographies in the emerging markets,” Mr. Cohen said. “They've got more risk. They need to manage that better.”

Ms. Pittinger said interest in foreign workers comp has grown steadily in recent years, despite the economic downturn and technology that has made it easier to communicate with business partners in international locations.

“When we're first ... trying to build business relationships overseas, nothing replaces that face-to-face contact,” she said.

Despite more companies seeking foreign comp coverage, experts say many firms that could use the protection often are unaware that such insurance exists.

“You have to know about it in order to ask for it,” Mr. Callard said.

Experts say the cost of foreign voluntary workers comp can be worthwhile for companies to protect themselves from increasing exposure as they build a global presence.

“What I try to focus our clients on is the important travel assistance and related services that are provided that you don't get under a U.S. domestic workers comp” policy, Mr. Cohen said. “That service piece, I think, is more important than anything.”