Buy, build or partner?
As insurance and assistance companies become increasingly aware of the advantage of offering security cover as part of their service offering, some interesting partnerships have developed in recent years. Aaron Hawkins looks at the reasons behind these pairings, how to choose a security partner, and how to stay ahead of the competition
First published in ITIJ 121, February 2011
As insurance and assistance companies become increasingly aware of the advantage of offering security cover as part of their service offering, some interesting partnerships have developed in recent years. Aaron Hawkins looks at the reasons behind these pairings, how to choose a security partner, and how to stay ahead of the competition
What a difference few years can make. It wasn’t that long ago when the travel assistance industry had a well-defined set of services such as emergency road side assistance, 24/7 emergency medical assistance, medical evacuation co-ordination, cost containment etc. Over time, that basic list of services began to expand with complementary services, such as legal help, which were frequently required in conjunction with providing medical support services.
“In the early going, assistance companies were finding that medical issues, such as those occurring from a car accident, invariably led to the need for legal assistance,” says Dick Atkins, a Philadelphia-based lawyer to many assistance companies. “Assistance companies and their clients were realising that having one without the other was inconvenient and risky.”
With a number of business models currently in play, one could argue that no one unified services strategy is a clear winner
That list of services continues to grow. As geo-political tensions escalate, multi-national organisations are looking for security solutions to cover the needs and concerns of their international travellers and expatriate populations. Initially, assistance companies addressed this need by adding services such as kidnap and ransom cover in a manner similar to how legal services were being provided. Some companies, such as International SOS, developed in-house security programmes, while others looked to various outside providers to selectively meet their clients’ growing needs.
Times are changing
Beyond geo-political volatility, there have been a number of factors behind the move to add security services to assistance company portfolios:
- Competition – in 2008, International SOS raised the competitive stakes for security businesses by announcing its joint venture with London-based Control Risks. Shortly thereafter, other major assistance providers (See Table A) announced strategies for providing clients with a unified medical and security assistance platform. Since then, many large multinational corporations have adopted security services as a part of their travel assistance contracts. As they shop the market for new providers, they are looking for similar or better security offerings. Assistance companies without solutions simply cannot compete.
- Differentiation among insurance providers – retail travel insurance is primarily about price. However, corporate travel policies are under more scrutiny by human resources and risk management departments. While this scrutiny may be driven by increased regulatory requirements for duty of care, it is also driving the insurance companies to look for new ways, such as security services, to differentiate their policies. The same can be said for credit card providers. Many are looking to travel security services as a way to differentiate their products. As an example, HSBC’s Institute of Directors Visa Card offers access to Red24’s security advice and assistance.
- Regulatory pressure – UK duty of care legislation, specifically the combination of The Health and Safety at Work Act, 1974; The Management of Health and Safety and Work Act, 1999; and the Corporate Manslaughter Act, 2007, make employers responsible for employee safety while they are travelling on business. The more that security assistance services are included on travel insurance and assistance policies, the greater the chance of reference in an employment tribunal, putting an uncovered employer at increasingly greater risk.
“The past year has become a turning point,” Atkins said. “We’ve reached the point of critical mass where it now becomes unusual for an assistance company to not provide security-related services. Due diligence requires something to be in place. Without it, companies will fail their clients.”
Michael J Kelly, president and chief executive officer of On Call International, agrees. He said: “It's clear that most of the assistance providers in the world are partnering with security firms either by direct partnerships or by acquisition because the world has become seemingly more unstable. Some of our clients have members travelling and working in the most dangerous parts of the world.”
The best approach?
In making the move to provide security services, assistance and insurance companies are taking different approaches. Some are buying the capability, others are developing it internally while most are partnering with a security service provider. With a number of business models currently in play, one could argue that no one unified services strategy is a clear winner.
But, we are seeing some interesting dynamics beginning to emerge:
- Some medical assistance companies are buying security services (e.g. online risk information, security call centre support, itinerary tracking) on an ad hoc basis. This approach may suffice for the insurance or affinity markets, but will likely prove to be inadequate in serving the corporate market. There is precedence in the market for turnkey solutions that provide travellers with a full menu of prevention, intervention and response solutions from pre-departure training and information to evacuation capabilities.
- In other instances, even though both medical and security services are available, they are being marketed as completely separate and unrelated offerings.
- Boutique or niche security providers are finding that competitive pressures are forcing them to expand their product and service portfolio beyond their capability. While the old adage ‘jack of all trades, master of none’ applies, it makes a lot of sense to really understand what your market is looking for.
For assistance companies or insurance providers who have yet to establish a security strategy – the question remains: what to do?
The phrase ‘the devil is in the detail’ certainly applies when looking at security services, because they are as broad ranging as the medical services world. However, in the world of medical services there are many different credentialing and regulatory bodies that help buyers filter through the different providers to find the ones that best meet their needs.
in the world of medical services there are many different credentialing and regulatory bodies that help buyers filter through the different providers to find the ones that best meet their needs … [but] credentialing for security service providers is not as obvious or clear
Credentialing for security service providers is not as obvious or clear. Outside of military or public safety standards, best practice references are limited to organisations like ASIS International. The limited number of leadership bodies makes it extremely challenging to determine how well qualified a company might be for meeting any particular need. As a result, identifying a quality professional security provider often comes down to reputation and ideally references.
When assistance and insurance companies are looking to partner with a commercial or operational security services provider, they are typically considering three types of companies:
- Private Military Company (PMC)
- Private Security Company (PSC)
- Risk Management Consultancy
PMCs tend to supplement government forces in the provision of security services to government clients, while PSCs cater largely to corporate and individual clients in the provision of hard security services like guarding and close protection. Risk management consultancies offer the softer, more cerebral services like crisis management and evacuation planning, but will invariably be able to arrange for the hard services too.
All three types of security company provide value from an operational perspective, but commercial partnerships must consider more than just operational logistics. While protecting people and assets is a primary concern, managing reputational and financial risk is one of the most commonly overlooked factors when selecting an appropriate partner. Assistance companies that are involved in corporate contracts should understand that there is often an expectation that solutions should also consider the client’s reputation and revenue – a forte of risk management consultancies. A PMC or PSC might have ‘boots on the ground’ but they may not have the commercial risk management experience to understand how their plans or actions could impact a corporate entity.
In order to be competitive, there is a wealth of security consulting, management and technology services that an assistance or insurance company can add to their services portfolio. Beyond the more customary services of 24/7 medical and security hotlines, online global risk information services and itinerary travel tracking services, etc., companies may want to evaluate services such as GPS-enabled smart phone tracking, asset tracking devices and online travel awareness training, all of which can help customers build risk mitigation solutions.
Unfortunately, the market is not waiting for those without a security strategy to catch up. Legacy providers are moving to the next level by launching next-generation or patented applications as a means of thwarting serious competitive threats.
Assistance companies that are involved in corporate contracts should understand that there is often an expectation that solutions should also consider the client’s reputation and revenue
Closing the gap will require quick action. Perhaps the quickest and least expensive option is a partnership with an existing security services provider. For those who choose this route, the past several years can be instructive in defining the characteristics of successful partnerships, as shown below:
- Successful marketing strategy – companies must be able to clearly articulate how the medical and security services work as part of a total solution. Adding a ‘bolt on’ security feature or service will simply open companies to greater scrutiny by a marketplace that is very quickly understanding the difference between ‘me too’ and operationally integrated medical and security strategies. Embracing anything less than a turnkey solution may place your company at a disadvantage.
- Seamless operational integration – partnerships must have a robust operational integration such that any interaction between the medical or security company is seamless. Clients will expect both the perception and the experience that your medical and security solution is efficiently integrated.
- Sustainable commercial agreement – like any relationship, commercial relationships must be based upon win-win principles. Don’t be greedy. It is in the best interest of any partnership to ensure the economics remain equitable, mutually beneficial and flexible.
Clearly, a new game is afoot. Just as they have done in the past, travel assistance companies are adapting their service offerings to meet the demands of an ever-changing world. Today more than ever, geo-political dynamics, competition, client demands and regulatory pressures are driving assistance companies to incorporate security services into their offering. They are accomplishing this through the acquisition of a security company, building the capabilities internally or partnering with a security provider – the latter solution being the most prevalent. For companies that have yet to develop a security strategy, partnerships probably represent the fastest and least expensive option for regaining a competitive stance in the market. Keys to success will be centred on a full menu of integrated services in a partnership where both companies are able to fully benefit from the relationship.