EPLI Update: Rates, Exposures and Underwriting

Increased risk factors are leading to higher rates and stricter underwriting in the employment practices liability insurance (EPLI) sector. Here’s a breakdown of what’s happening with EPLI now.

EPLI Rates Soar

Insurance rates have been increasing in general, but EPLI rate hikes have been above average.

In the third quarter of 2021, the MarketScout Market Barometer shows that EPLI rates increased by 9%, noticeably higher than the composite rate for all commercial lines, which was up 6.8%. Both commercial auto and commercial property lines also saw average rate increases of 9%, and the only lines that saw higher rate hikes were umbrella/excess (up 11.7%) and D&O liability (up 11.3%).

The rate hikes aren’t the only changes we’re seeing in EPLI, either. Risk & Insurance says that insurers are scaling back their EPLI offerings, and many insurers are introducing exclusions for various pandemic-related claims.

A Combination of Factors Are Impacting EPLI

What’s happening with EPLI right now can be attributed to a combination of factors.

COVID-19 is an obvious and important source of upheaval in the market right now. The COVID-19 Employment Litigation Tracker from Fisher Phillips shows that there have been 4,198 cases as of December 2, 2021. The most common case types involve remote work and leave conflicts. Although many people have anticipated a surge in vaccine-related litigation, so far, there have only been 109 cases. However, this number could rise as more employers make vaccines mandatory.

Sexual harassment cases are another factor. The #MeToo movement really began to heat up in 2017, and payouts related to sexual harassment claims started increasing around the same time: the EEOC says that monetary benefits related to sexual harassment claims totaled $40.7 million in 2016, $46.3 million in 2017, $56.6 million in 2018, $68.2 million in 2019, and $65.3 million in 2020.

Racial discrimination has resulted in numerous claims against employers. Some of these claims have had massive awards and settlement. In one example, TechCrunch says that Tesla has been ordered to pay $137 million to a former worker who says his supervisors neglected to stop racial abuse.

Biometrics technology is also leading to new employee privacy concerns and the potential for litigation. Business Insurance says that a court has ruled that an EPLI policy must provide coverage for a case involving biometrics litigation. The case occurred in Illinois, where the Biometric Information Privacy Act requires consent before employers can collect biometric information and allows plaintiffs to sue for violations.

Take Control of Your Risks

Given what’s happening with EPLI right now, employers need to be proactive about managing their employment practices risks. Doing so will help prevent claims, and it will also make the risk more attractive to underwriters when it’s time for renewal.

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