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Employment practices liability suits are no longer a back-burner risk exposure.

In fact, 74% of risk managers responding to a recent survey said their companies faced employment practices lawsuits in the past year.

Discrimination and sexual harassment allegations and employment practice liability lawsuits-particularly in the wake of the headline-grabbing cases against Texaco Inc. and Mitsubishi Motor Manufacturing Co. of America-are commanding increased attention among risk managers.

The survey of 247 risk managers conducted by Chicago-based Aon Risk Services Cos. Inc. offers a barometer of risk managers' concerns and attitudes on a range of topics, including: their profession, broker consolidation, government and public policy and use of the Internet. The study will be released next week at the Risk & Insurance Management Society Inc. conference in Atlanta.

For the past nine years, New York-based Alexander & Alexander Services Inc. has conducted the survey.

A&A was acquired in December by Aon, a prime example of the hot trends addressed in the study.

Another trend closely tracked by risk managers is employment practices liability.

Of the risk managers who said cases against their companies were litigated, 47% of the risk managers said their companies won, another 47% said their companies settled while the remaining 6% report losing, the survey said.

Despite these statistics, 61% of the surveyed respondents said they do not carry employment practice liability insurance.

"There's a general feeling that management does not do as good a job" enforcing policies and procedures aimed at mitigating potential discrimination problems if they know they are insured, said Rick Broderick, director of risk management for VF Corp., a Wyomissing, Pa.-based apparel manufacturer.

However, Mr. Broderick said the biggest reason for employers not purchasing EPL insurance is that it hasn't adequately met coverage needs in the past, "and it's been fairly pricey."

VF Corp. does not carry EPL coverage, but "we're looking at it," Mr. Broderick said. "It's a much better policy today."

Another major issue facing

risk managers is within their own departments. The most important career-related issue over the next five years, according to 67% of the respondents, is increasing the value of the risk management function.

"It's an evolving situation where corporations demand more out of the risk management function and risk managers are rising to it," said Ed Kiessling, managing director of Aon Risk Services in New York.

"Risk managers have to have skills, knowledge and information they've not had to have before," added Rick Voss, chairman of Aon Worldwide Resources in Chicago.

In fact, 76% of respondents said their function is expected to contribute to the company bottom line.

As they focus on meeting the challenges of their own role, survey respondents are not yet expressing general concern that mergers and acquisitions among brokers are going to be problematic for risk managers.

Despite rapid consolidation in the brokerage industry, 66% of the risk managers surveyed said their companies have not been adversely affected.

Since the survey was conducted, however, Marsh & McLennan Cos. Inc. acquired Johnson & Higgins. That latest and largest deal may have provided the critical mass of consolidations necessary to prompt more risk managers to critically analyze the potential impact on their companies.

"The question was posed right at the time our merger was being undertaken," said Mr. Voss, referring to the A&A deal. A lot of risk managers have thought about the effects of brokerage consolidation "more in the last three weeks than in the last three or four months," he said.

"Particularly with the Marsh and J&H deal, a lot of risk managers that think in terms of the two-broker concept now are pondering if they want two brokers or if they want to change their philosophy," said Mr. Kiessling.

David Strode, assistant treasurer and director of banking, capital markets and risk management for Northrop Grumman Corp. in Los Angeles and a longtime client of A&A and J&H, does not think the consolidation will affect his company. "I don't think the services they provide me are going to be enhanced because they are bigger. They had enough clout before to get the job done," he said. "They can't do a heck of a lot more for me."

While industry consolidation may be of greater concern today, integrating workers compensation programs with disability, group medical and other benefit programs hasn't climbed to the top of their agendas.

The survey defines benefit integration as the "coordinated approach to administration, management information, benefit delivery payment and communications involving any combination of workers comp with group medical, long-or short-term disability and sick pay."

Seventy percent of the surveyed risk managers said their companies are not currently integrating any of these benefits, and 59% said they are not even considering the issue.

"I think there really is an interest" in benefit integration, but "it's not quite as easy as it seems," Mr. Broderick said. Not only do companies face "protectionism" from each of the different departments, but the "insurance industry itself does not want to do it."

When it comes to items higher on risk managers' priority lists, the survey shows they may be finding help as close as the click of a mouse.

More and more risk managers are surfing the Internet, according to the survey.

In last year's survey, only 25% of the risk managers said they regularly surfed the net. This year, 77% said they have access to the Internet, and 92% said technology is making their jobs easier.

In addition, 67% of the risk managers reported having e-mail links to their brokers and/or insurance consultant.

The growth of computer use comes down to two things: "the ever-increasing sophistication of risk managers and the demand and thirst for information among those professionals," said John Lumelleau, executive vp and managing director-business development for Aon Risk Services in New York.

While risk managers say having an electronic link to their broker is important, the single most vital service a broker can provide is innovative risk management solutions, survey respondents said.

Marketing expertise, responsiveness, information and global servicing are also on the list of services that risk managers need brokers to provide.

In terms of public policy, a majority of risk managers do not place much confidence in the 105th Congress to make progress on such issues as Superfund, tort reform and product liability.

Congress will not succeed in changing the Superfund liability system, according to 71% of the risk managers surveyed; Congress will not make any significant changes in product liability laws, according to 80% of the respondents; and Congress will not make any headway in tort reform initiatives, according to 77% of the respondents.

For the ninth consecutive year, a majority-60%-of the risk managers rank caps on non-economic and punitive damages as the most important civil justice reform issue.

And despite the Liggett Group Inc.'s recent settlement of tobacco liability suits with more than 23 states and its admission that tobacco is addictive and causes cancer, 62% of risk managers surveyed said they do not believe there will be a legislative solution to the tobacco controversy.

One step risk managers hope Congress won't take is expansion of the Family and Medical Leave Act, with 43% of the surveyed risk managers saying that move would have a negative impact on corporate America.

Risk managers cite the effects of downsizing on their companies, saying that an extended loss of employees under FMLA would create additional costs, lowered productivity and heightened stress on the remaining workers.

The survey also found:

Seventy percent of the respondents said they use alternative risk financing as part of their risk management strategy, while 30% do not.

Fifty-nine percent of the surveyed risk managers said their workers comp costs are improving, while 35% said costs are stabilizing and 6% said costs are increasing.

About 75% said they have workers comp managed care programs in place.

Fifty-five percent of the risk managers report increased worker complaints of repetitive motion injuries.

For a free copy of the survey, contact Paul Cristiano at Aon Risk Services, 914-742-3093. Free copies also will be distributed at Aon's booth at the Risk & Insurance Management Society Inc. conference in Atlanta April 13-18.