The Era of #Metoo has created many challenges in the insurance industry. As the employment practices claims continue to escalate, many companies have begun to consider purchasing or increasing Employment Practices Liability (EPL) limits to help protect the company as various social movements evolve. The cost of this insurance has begun to rise and is getting harder to obtain.
The MeToo and other social movements have empowered employees and created hypersensitive work environments. This has led to higher claims activity and bigger payouts. Employers are often ill prepared in addressing workplace issues as they evolve on social media and other sources. Many larger companies purchase Director’s and Officer’s Liability Insurance and EPLI on separate forms. However, most smaller companies combine these coverages in order to save costs. Whether EPLI is combined with Director’s and Officers’ Liability aside, the trends don’t look good for companies. We have listed below some trends we see in the market which are affecting insurance costs and coverage.
Among the many trends we see now and are expecting in the next few years.
- Greater Claims Frequency: As more MeToo and social movement claims evolve we see that more companies will require insurance and at higher limits. While the entertainment industry makes media attention, these types of claims are seen in every industry and every corner of the business environment. Other industries such as hospitality, professional services, health care, casinos and restaurants, just to name a few will also feel the impact. “Obviously everybody’s talking about entertainment, but it’s just the tip of the iceberg,” says Peter R. Taffae, managing director at Executive Perils. “What #MeToo is doing is taking away a lot of the stigma associated with reporting the harassment that has been going on in every industry. We really anticipate a lot more volume on that, and those are not cheap claims.” [1]
- Stricter Underwriting Scrutiny: With claims frequency and severity evolving, underwriting these risks will require more underwriting scrutiny. In addition, insurers will begin to ask about employee handbooks and the training programs these companies undergo to see how much exposure the company has.
- Higher Rates: We have seen significant increases in rates for D&O and EPL. We would expect that to continue for the foreseeable future as the insurance market adjusts to the change in exposure. Mike Smith, President and CEO said, “I haven’t seen rate increases like this is over a decade. The markets don’t know how to react as the cases haven’t made their way through the courts. I would expect the rates to stabilize in a few years as more claims data evolves, but in the meantime, it’s going be a wild ride. Like all claims, the more that are filed, the higher the rates are expected to climb. And that could lead to difficulty in obtaining coverage or even exclusions on a policy. This will create problems in the future for general and management liability.”
- Increased deductibles: We are already seeing a trend in increased deductibles on D&O and EPL policies. The most significant jumps have been in the last 12 months. We would expect as employers to increase their share of the insurance cost that companies would also continue to invest more money in training of their employees on the new work environment and the risks. This will add costs to the companies in addition to the increase insurance costs.
In order to create a better environment, companies must adapt to the changing social scape and as a result must be ready to change how they handle liability. Consult your insurance professional about how to best protect your risks. To learn more about this topic, view our EPLI page here.
[1] https://www.iamagazine.com/markets/read/2018/04/02/what-does-metoo-mean-for-private-d-o-insurance
