EPL Insurance Pricing Trends 2023

EPL Insurance Market Update

During 2022, the insurance market saw three main employment-related concerns:

1. Continued claims related to social justice issues
2. Residual COVID-related claims regarding vaccine status and remote work challenges
3. A rise in wrongful termination cases as companies downsized due to economic concerns

Similar to prior years, many EPL insurance claims relating to critical social justice issues surfaced in 2022. The most common of these claims were discrimination suits in which claimants allege discrimination based on race, gender, and sexual orientation. As social justice issues continue headlining the news, it only makes sense to expect discrimination and similar EPL cases to continue.

While the global pandemic was winding down, many businesses faced COVID-related lawsuits last year. The most common were discrimination suits related to vaccination and remote work status. While these cases will likely decline as the pandemic fades into memory, there are still enough lawsuits to consider this an ongoing trend.

The second half of 2022 brought a new EPL issue — the possibility of a recession and resulting downsizing. The tech sector was hit especially hard by multiple rounds of downsizing, from small startups to major players. This will likely lead to a rise in wrongful termination and discrimination suits, making it a pivotal trend to follow in 2023.

EPL Insurance Pricing Trends 2022

While companies saw EPL insurance price hikes up to 25% in 2021, with some high-risk companies seeing increases up to 75%, prices stabilized more last year. Despite employment-related claims, most companies only experienced a 5-10% increase in EPL insurance premiums in 2022. However, residual risk still plays a significant role in determining these premiums, as insurers account for potential future claims and the inherent uncertainties in employment practices.

2023 EPL Market Factors

We expect the factors influencing the 2023 EPL insurance market to remain similar to 2022. Social justice issues, such as discrimination based on race or gender, will continue to remain top-of-mind for many employees and employers.

Underwriters will likely emphasize the economic and financial stability of companies seeking EPL coverage. However, the more considerable concern for the 2023 EPL insurance market is the potential for a recession or other economic downturns. Any time an economic downturn leads to downsizing or layoffs, companies can expect a rise in EPL claims.

How EPL Insurance Benefits All-Sized Companies

Many business leaders need to recognize the need for EPL insurance before it’s too late. It’s easy to think your organization won’t face discrimination or wrongful termination lawsuits. But even companies that do their best to take care of their employees could face lawsuits, especially when economic instability might lead to layoffs.

Employment practices liability insurance helps protect your business from claims that an employee’s employment rights were violated. These lawsuits often claim your organization participated in discrimination against the employee or wrongfully terminated them. Even if the claims are baseless, your business could face expensive defense fees while waiting for suit dismissal. EPL insurance is crucial to help mitigate the risk (and expense) of wrongful termination or discrimination lawsuits. That said, there are five common types of EPL lawsuits, which are:

• Wrongful termination happens when an employee’s termination breaches at least one term of an employment contract or employment law.
• Discrimination is when an employee is treated unfavorably based on race, gender, age, or another protected status.
• Sexual misconduct or harassment occurs when an employee faces unwanted sexual advances or remarks.
• Defamation of character happens when an organization makes a false statement about an employee to hurt their reputation.
• Invasion of privacy is when an employee’s personal space is wrongly searched, or their private information is exposed.

Generally, EPL insurance coverage helps pay for legal fees, such as defense attorney fees to defend your organization in court, regardless of the outcome, and settlements or judgments. Companies with more than one employee can benefit from EPL coverage. A trusted commercial insurance broker can help you customize your coverage by helping you identify the largest EPL risks your business faces in 2023 and beyond.

EPL Insurance Claim Examples

Example 1: Discrimination and Wrongful Termination

A company faces an EPL insurance claim when a former employee alleges wrongful termination based on discrimination. The claimant seeks compensation for lost wages, emotional distress, and damages related to the alleged discrimination. The employee claims they were terminated due to age, violating anti-discrimination laws. The company’s EPL insurance coverage helps protect them by providing legal defense costs and potential settlement or judgment payments, subject to policy limits and terms.

Example 2: Sexual Harassment and Hostile Work Environment

An employee files an EPL insurance claim against their employer, alleging sexual harassment and the creation of a hostile work environment. The claimant states that a coworker engaged in inappropriate behavior, including unwanted advances, lewd comments, and explicit messages. The employee suffered emotional distress, discomfort, and decreased work performance. The company’s EPL insurance coverage helps cover legal expenses, settlements, and potential damages resulting from the claim, subject to policy terms and conditions.

Example 3: Retaliation and Unlawful Employment Practices

A former employee files an EPL insurance claim against their previous employer, alleging retaliation after reporting workplace safety violations. The claimant asserts that they faced adverse employment actions, such as demotion and reduced hours, in response to their whistleblowing activities. The employee seeks compensation for lost wages, emotional distress, and damages resulting from the alleged retaliation. The employer’s EPL insurance coverage assists in covering legal costs, potential settlement amounts, and related expenses within the policy’s limits and terms.

Trending EPL Insurance Issues

As we look ahead to 2023, a handful of EPL insurance issues stand out, including:

• Economic instability and related layoffs
• The ability for companies to manage remote work or return to the office
• Political and social pressure, particularly relating to race and gender issues
• Pay equity

Likely, the biggest concern for many businesses in 2023 is the changing economic landscape. As we face economic instability, companies may have to downsize. The resulting layoffs could cause a wave of EPL insurance claims.

Companies will also have to navigate a post-COVID workplace. Those who promised employees or new hires their jobs would be fully remote may need help with hybrid or in-person work.

As in 2022, race, gender, and sexual orientation, social issues will continue affecting businesses. Cases of discrimination based on these issues could continue to rise throughout 2023.

Finally, a workers’ market means more employees are demanding pay transparency — and equity — in both job listings and at work. This could lead to increases in EPL claims as employees compare their salaries. For example, if a female employee finds out her male colleagues make significantly more money, despite similar backgrounds and education, she might make a discrimination claim based on gender.

2023 EPL Insurance Pricing Outlook

With the shifting EPL landscape, what can business leaders expect for EPL pricing in 2023? Fortunately, the current EPL environment shouldn’t cause pricing to skyrocket. In fact, we expect renewal pricing to stay flat, with minimal increases up to 10%.

Two main reasons for this surprisingly slight increase are 1.) employee job prospects and 2.) increased competition in the EPL market.

Although the tech sector experienced layoffs in late 2022, most layoffs were of well-educated tech employees. Many of these terminated employees have the education and experience to find new employment quickly. When downsized employees find new, comparable work promptly, it’s less likely they’ll file EPL claims.

Additionally, the EPL insurance market has seen an increase in carriers. As new carriers enter the market, capacity increases. This helps steady prices and slow premium increases as carriers look to keep their pricing competitive.

Although we don’t foresee sharp increases in EPL pricing in 2023, businesses should still do their due diligence to find the best terms. Working with a knowledgeable insurance broker can help your business find affordable EPL insurance that offers the protection your company needs.

Understanding the details of what coverage your manufacturing company needs can be confusing. Founder Shield specializes in knowing the risks manufacturers face to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.

What to know more about EPL insurance? Talk to us! Please contact us at info@foundershield.com or create an account here to get started on a quote.